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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                       

Commission File Number: 001-38586

RUBIUS THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

    

46-2688109

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

399 Binney Street, Suite 300
Cambridge, Massachusetts
(Address of principal executive offices)

02139
(Zip code)

(617679-9600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

RUBY

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes No 

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of April 29, 2022, the registrant had 90,213,126 shares of common stock, $0.001 par value per share, outstanding.

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plan, objectives of management, results of preclinical studies or clinical trials and expected market growth are forward-looking statements. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under “Risk Factors” including, among other things:

expectations regarding the success, cost and timing of our product development activities and clinical trials, including statements regarding the timing of initiation, enrollment in and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available, and our research and development programs;
plans to advance product candidates into or successfully complete any clinical trial;
beliefs about data results and analyses, including what early data demonstrates or suggests, as well as expectations regarding the safety and efficacy, and overall potential and advantages, of our product candidates and our expected timing for data;
beliefs that we have the potential to significantly expand our manufacturing capabilities and plan to stage additional investments based on future needs and in preparation for potential pivotal trial and eventual commercialization;
beliefs that we can obtain or manufacture adequate and timely supply of our product candidates for clinical trials or for commercial use, if approved;
expectations regarding the operation of our manufacturing facility and any plans for further renovation or expansion;
beliefs regarding and plans for our identified research priorities to advance our technologies;
plans to license additional intellectual property relating to our product candidates and expectations that we will be able to comply with our existing license agreements;
expectations that our cash will be sufficient to fund our operating expenses, capital expenditure requirements and debt service payments into the second half of 2023 and that we will be able to obtain funding for our operations, including funding necessary to complete further development, clinical trials and, if approved, commercialization of our product candidates;
beliefs about the intellectual property rights of others and our ability to commercialize our products in light of such third-party rights;
beliefs about developments relating to cellular therapies, including red blood cell therapies;
expectations for competing therapies that are or become available;
plans for the commercialization of, and expectations for the market for, our product candidates, if approved;

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our plans to research, develop and commercialize our product candidates;
our plans to attract collaborators with development, regulatory and commercialization expertise;
expectations to enter into agreements with third parties in connection with the commercialization of our product candidates and any other approved product;
beliefs about the size and growth potential of the markets for our product candidates, and our ability to serve those markets;
expectations for the impact of global economic and political developments on our business and on our clinical trials, including economic slowdowns or recessions that may result from the ongoing COVID-19 pandemic;
expectations for the rate and degree of market acceptance of our product candidates, if approved;
anticipated regulatory developments in the United States and foreign countries;
expectations that we will be able to contract with third-party suppliers and manufacturers and their ability to perform adequately;
estimates for expenses, future revenue, capital requirements and needs for, and ability to obtain, additional financing;
the expected impact of laws and regulations and legislative and regulatory changes;
our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates; and
our expectations regarding our transition to a large accelerated filer and our loss of emerging growth company status.

All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of or any material adverse change in one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the Securities and Exchange Commission, or the SEC, could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.

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Summary of the Material Risks Associated with Our Business

Our business is subject to numerous risks and uncertainties that you should be aware of in evaluating our business. These risks include, but are not limited to, the following:

we have incurred net losses in every year since our inception and anticipate that we will continue to incur net losses in the future;

we will require additional capital to fund our operations and if we fail to obtain necessary financing, we will not be able to complete the development and commercialization of our product candidates;

we have a limited operating history, which may make it difficult to evaluate our technology and product development capabilities and predict our future performance;

our business is highly dependent on the success of our initial product candidates targeting cancer and autoimmune diseases. All of our product candidates will require significant additional nonclinical and clinical development before we can seek regulatory approval for and launch a product commercially;

the successful development of cellular therapeutics, such as our investigational Red Cell Therapeutics, or RCTs, is highly uncertain;

our RCT product candidates are based on a new technology, which makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval, if at all;

the FDA, the EMA and other regulatory authorities may implement additional regulations or restrictions on the development and commercialization of our product candidates, which may be difficult to predict;

clinical development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of any product candidates;

our ongoing and planned clinical trials or those of our future collaborators may reveal significant adverse events not seen in our preclinical or nonclinical studies and may result in a safety profile that could inhibit regulatory approval or market acceptance of any of our product candidates;

positive results from early preclinical studies or early clinical trials of our product candidates are not necessarily predictive of the results of later preclinical studies or any future clinical trials of our product candidates;

if we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected;

cellular therapies are a novel approach and negative perception of any product candidates that we develop could adversely affect our ability to conduct our business or obtain regulatory approvals for such product candidates;

we are subject to numerous laws and regulations, noncompliance with which would subject us to possible legal or regulatory action;

the effects of health epidemics like the ongoing COVID-19 pandemic, including recurring surges and waves of infection and emergent variants of the coronavirus, in regions where we, or the third parties on which we rely, have business operations could adversely impact our business, including our clinical supply, preclinical studies, ongoing and planned clinical trials;

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if we are unable to obtain and maintain patent protection for any product candidates we develop or for our RED PLATFORM, our competitors could develop and commercialize products or technology similar or identical to ours, and our ability to successfully commercialize any product candidates we may develop, and our technology may be adversely affected;

we intend to rely on patent and other rights and available regulatory exclusivities, including the status of our product candidates, if approved, as products eligible for reference product exclusivity under the Biologics Price Competition and Innovation Act, or BPCIA. If we are unable to obtain or maintain exclusivity and otherwise protect our intellectual property from the combination of these approaches, we may not be able to compete effectively in our markets;

third-party claims of intellectual property infringement, misappropriation or other violation against us, our licensors or our collaborators may prevent or delay the development and commercialization of our product candidates, RED PLATFORM and other technologies;

our product candidates are uniquely manufactured. If we or any third-party manufacturers that we may engage encounter difficulties in manufacturing our product candidates, our ability to provide supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost structure;

we have acquired and are establishing our own manufacturing facility and infrastructure in addition to or in lieu of relying on contract manufacturing organizations for the manufacture of our product candidates, which is costly, time-consuming, and which may not be successful; and

we do not have extensive experience as a company managing a manufacturing facility.

The summary risk factors described above should be read together with the text of the full risk factors below and in the other information set forth in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes, as well as in other documents that we file with the SEC. If any such risks and uncertainties actually occur, our business, prospects, financial condition and results of operations could be materially and adversely affected. The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial may also materially adversely affect our business, prospects, financial condition and results of operations.

iv

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Rubius Therapeutics, Inc.

Table of Contents

Page No.

PART I - FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements

1

Condensed Consolidated Balance Sheets (Unaudited)

1

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

2

Condensed Consolidated Statements of Cash Flows (Unaudited)

3

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

4

Notes to Condensed Consolidated Financial Statements (Unaudited)

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4.

Controls and Procedures

29

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

30

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

94

Item 3.

Defaults Upon Senior Securities

94

Item 4.

Mine Safety Disclosures

94

Item 5.

Other Information

94

Item 6.

Exhibits

95

Signatures

96

Solely for convenience, the trademarks, service marks and trade names referred to in this quarterly report are listed without the ®, (sm) and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names.

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PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

RUBIUS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

March 31, 2022

December 31, 2021

Assets

Current assets:

Cash and cash equivalents

$

98,104

$

225,848

Investments

 

78,413

 

Prepaid expenses and other current assets

 

3,526

 

3,975

Total current assets

 

 

180,043

 

229,823

 

Operating lease, right-of-use-asset

33,847

35,095

Property, plant and equipment, net

 

51,660

 

51,530

Restricted cash

 

1,573

 

1,573

Total assets

$

267,123

$

318,021

Liabilities and Stockholders' Equity

 

 

Current liabilities:

 

 

Accounts payable

$

12,084

$

11,572

Accrued expenses and other current liabilities

 

7,752

 

14,072

Operating lease liabilities

 

9,082

 

9,015

Total current liabilities

 

28,918

 

34,659

Long-term debt, net of discount

 

76,377

 

76,154

Other long-term liabilities

101

135

Operating lease liabilities, net of current portion

 

27,078

 

28,291

Total liabilities

 

132,474

 

139,239

Commitments and contingencies (see Note 9)

 

 

Stockholders' equity:

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized at March 31, 2022 and December 31, 2021; no shares issued or outstanding at March 31, 2022 and December 31, 2021

Common stock, $0.001 par value; 150,000,000 shares authorized at March 31, 2022 and December 31, 2021; 90,186,626 and 90,063,770 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

90

 

90

Additional paid-in capital

 

864,046

 

855,710

Accumulated other comprehensive loss

 

(57)

 

Accumulated deficit

 

(729,430)

 

(677,018)

Total stockholders' equity

 

134,649

 

178,782

Total liabilities and stockholders' equity

$

267,123

$

318,021

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1

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RUBIUS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

(Unaudited)

Three Months Ended March 31, 

 

2022

2021

 

Revenue

$

$

Operating expenses:

Research and development

38,299

 

27,677

General and administrative

12,563

 

13,240

Total operating expenses

50,862

 

40,917

Loss from operations

(50,862)

 

(40,917)

Other income (expense):

 

Interest income

48

 

26

Interest expense

(1,629)

 

(1,748)

Other income, net

31

309

Total other income (expense), net

(1,550)

 

(1,413)

Net loss

(52,412)

 

(42,330)

Net loss per share, basic and diluted

$

(0.58)

$

(0.51)

Weighted average common shares outstanding, basic and diluted

90,149,049

 

82,314,577

 

Comprehensive loss:

 

Net loss

$

(52,412)

$

(42,330)

Other comprehensive income (loss):

Unrealized gains (losses) on investments, net of tax of $0

(57)

 

3

Comprehensive loss

$

(52,469)

$

(42,327)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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RUBIUS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three months ended March 31, 

    

2022

    

2021

    

Cash flows from operating activities:

 

  

 

  

 

Net loss

$

(52,412)

$

(42,330)

Adjustments to reconcile net loss to net cash used in operating activities:

 

  

Stock-based compensation expense

8,260

 

8,642

Depreciation and amortization expense

1,559

 

1,496

Amortization (accretion) of premium (discount) on investments

(25)

 

61

Non-cash interest expense

204

 

693

Changes in operating assets and liabilities:

 

  

Prepaid expenses and other current assets

287

 

(384)

Operating lease, right-of-use-asset

1,248

1,347

Accounts payable

124

 

(757)

Accrued expenses and other current liabilities

(5,200)

 

(6,325)

Other long-term liabilities

(34)

(34)

Operating lease liabilities

(1,146)

(1,148)

Net cash used in operating activities

(47,135)

 

(38,739)

Cash flows from investing activities:

  

 

  

Purchases of property, plant and equipment

(2,402)

 

(748)

Purchases of investments

(78,445)

 

Sales and maturities of investments

42,500

Net cash provided by (used in) investing activities

(80,847)

 

41,752

Cash flows from financing activities:

  

 

  

Proceeds from underwritten public offering of common stock, net of commissions and underwriting discounts

188,000

Proceeds from issuance of common stock upon exercise of stock options and under employee stock purchase plan

76

 

5,908

Net cash provided by financing activities

76

 

193,908

Net increase (decrease) in cash, cash equivalents and restricted cash

(127,906)

 

196,921

Cash, cash equivalents and restricted cash at beginning of period

227,583

 

92,901

Cash, cash equivalents and restricted cash at end of period

$

99,677

$

289,822

Supplemental cash flow information:

Cash paid for interest

$

1,425

$

1,054

Cash paid for leases

$

1,823

$

1,901

Supplemental disclosure of non-cash investing and financing information:

 

  

Purchases of property, plant and equipment included in accounts payable or accrued expenses

$

1,257

$

408

Offering costs included in accounts payable and accrued expenses

$

$

494

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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RUBIUS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)

Accumulated

Additional

other

Total

Common stock

paid-in

comprehensive

Accumulated

stockholders’

   

Shares

   

Amount

   

capital

   

loss

   

deficit

   

equity

Balances at December 31, 2021

 

90,063,770

$

90

$

855,710

$

$

(677,018)

$

178,782

Issuance of common stock

upon exercise of stock

options

18,228

76

76

Vesting of restricted stock units

104,628

Stock-based compensation

expense

8,260

8,260

Unrealized losses on

investments

(57)

(57)

Net loss

(52,412)

(52,412)

Balances at March 31, 2022

 

90,186,626

$

90

$

864,046

$

(57)

$

(729,430)

$

134,649

Accumulated

Additional

other

Total

Common stock

paid-in

comprehensive

Accumulated

stockholders’

   

Shares

   

Amount

   

capital

   

income

   

deficit

   

equity

Balances at December 31, 2020

 

81,053,651

$

81

$

621,946

$

4

$

(480,471)

$

141,560

Issuance of common stock,

public offering, net of estimated

issuance costs of $800

6,896,552

 

7

 

187,193

 

 

 

187,200

Issuance of common stock

upon exercise of stock

options

 

1,237,324

 

1

 

5,907

 

 

 

5,908

Stock-based compensation

expense

 

 

 

8,642

 

 

 

8,642

Unrealized gains on

investments

 

3

 

3

Net loss

 

(42,330)

 

(42,330)

Balances at March 31, 2021

89,187,527

$

89

$

823,688

$

7

$

(522,801)

$

300,983

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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RUBIUS THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of the Business and Basis of Presentation

Rubius Therapeutics, Inc. (“Rubius” or the “Company”) is a biopharmaceutical company that is biologically engineering red blood cells into medicines, called Red Cell Therapeutics, for the treatment of cancer and autoimmune diseases. Rubius was incorporated in April 2013 as VL26, Inc. under the laws of the State of Delaware. In January 2015, the Company changed its name to Rubius Therapeutics, Inc.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, the ability to establish clinical- and commercial-scale manufacturing processes and the ability to secure additional capital to fund operations. In addition, the Company is subject to uncertainty regarding the performance and safety of its product candidates in humans. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

The Company is monitoring the potential impact of the novel coronavirus (“COVID-19”), if any, on the carrying value of certain assets. To date, the Company has not experienced material business disruption, nor has it incurred impairment of any assets as a result of COVID-19. The extent to which these events may impact the Company’s business will depend on future developments, which are highly uncertain and cannot be predicted at this time. The duration and intensity of these impacts and resulting disruption to the Company’s operations is uncertain and the Company will continue to assess the financial impact.

On July 20, 2018, the Company completed its initial public offering (“IPO”), pursuant to which it issued and sold 12,055,450 shares of common stock, inclusive of 1,572,450 shares sold by the Company pursuant to the full exercise of the underwriters’ option to purchase additional shares. The aggregate net proceeds received by the Company from the IPO were $254.3 million, after deducting underwriting discounts and commissions and other offering costs. Upon the closing of the IPO, all of the shares of the Company’s outstanding convertible preferred stock then outstanding automatically converted into 51,845,438 shares of common stock.

On March 18, 2021, the Company completed an underwritten public offering (the “March 2021 Offering”), pursuant to which it issued and sold 6,896,552 shares of common stock. The aggregate net proceeds received by the Company from the March 2021 Offering were $187.2 million, after deducting underwriting discounts and commissions and other offering costs.

The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Company has incurred recurring losses since inception, including net losses of $52.4 million for the three months ended March 31, 2022 and $196.5 million for the year ended December 31, 2021. As of March 31, 2022, the Company had an accumulated deficit of $729.4 million. The Company expects to continue to generate operating losses in the foreseeable future.

The Company has financed its operations to date primarily through proceeds from private placements, its IPO, the March 2021 Offering and borrowings under credit facilities. The Company has devoted substantially all of its financial resources and efforts to research and development, including preclinical studies and clinical trials, and developing manufacturing capabilities. The Company will need to raise additional funds through public or private equity financings, debt financings, collaborations, strategic alliances or marketing, distribution or licensing arrangements to fund operations. The Company may not be able to obtain financing, or enter into collaboration or other arrangements, on

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acceptable terms, or at all. Furthermore, the terms of any financing may adversely affect the holdings or the rights of the Company's stockholders. The Company implemented certain cost reduction actions in April 2022, which are intended to focus its capital on advancing its cancer and autoimmune programs and technology platform. If the Company is unable to obtain additional funding, it will implement further cost reduction actions that delay, scale back or discontinue some or all of its research and development programs and technology platform activities in order to further extend its forecasted cash runway. These actions could adversely affect its business prospects. As of May 10, 2022, the issuance date of the interim condensed consolidated financial statements, the Company expects that its cash, cash equivalents and investments will be sufficient to fund its operating expenses, capital expenditure requirements and debt service payments into the second half of 2023.

The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current year presentation.

2. Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The condensed consolidated balance sheet at December 31, 2021 was derived from audited financial statements but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2021, on file with the SEC. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s condensed consolidated financial position as of March 31, 2022 and condensed consolidated results of operations for the three months ended March 31, 2022 and 2021 and the condensed consolidated cash flows for the three months ended March 31, 2022 and 2021 have been made. The Company’s condensed consolidated results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the accrual of research and development expenses and the valuation of stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Actual results may differ from those estimates or assumptions.

The full extent to which the ongoing COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including clinical trials, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19. As of the date of issuance of these unaudited condensed consolidated financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update estimates, judgments or revise the carrying value of any assets or liabilities. Actual results may differ from those estimates or assumptions.

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Concentrations of Credit Risk and of Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and investments. The Company’s cash, cash equivalents and investments, as of March 31, 2022, consisted of cash, money market accounts, U.S. government money market funds and U.S. government treasury bills. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company relies, and expects to continue to rely, on a small number of vendors to manufacture supplies and raw materials for its development programs. These programs could be adversely affected by a significant interruption in these manufacturing services or the availability of raw materials.

Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.

Restricted Cash

As of March 31, 2022 and December 31, 2021, the Company maintained letters of credit for the benefit of the landlords of its leased properties totaling $1.6 million and $1.7 million, respectively. The Company was required to maintain separate cash balances of these amounts to secure the letters of credit. Related to these separate cash balances, the Company included $1.6 million in restricted cash (non-current) in its condensed consolidated balance sheet as of March 31, 2022. As of December 31, 2021, the Company included $0.1 million in prepaid expenses and other current assets and $1.6 million in restricted cash (non-current) in its condensed consolidated balance sheet.

Cash, cash equivalents and restricted cash presented in the accompanying condensed consolidated statement of cash flows was $99.7 million and $289.8 million for the three months ended March 31, 2022 and 2021, respectively, of which $1.6 million and $1.7 million was restricted cash, respectively.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and investments are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values of the Company’s accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities. The carrying value of the Company’s long-term debt approximates its fair value due to its variable interest rate, which approximates a market interest rate.

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Investments

The Company’s investments are classified as available-for-sale and are carried at fair value. Realized gains and losses and declines in value are based on the specific identification method and are included as a component of other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. The Company classifies its investments with maturities beyond one year as short-term, based on their highly liquid nature and because such investments are available for current operations.

The Company evaluates its investments with unrealized losses for impairment. When assessing investments for unrealized declines in value, the Company considers whether the decline in value is related to a credit loss or non-credit loss. For credit losses, the Company reduces the investment to fair value through an allowance for credit losses recorded to the balance sheet and corresponding charge to the statement of operations. The allowance for credit losses and corresponding impairment charge is adjusted each period for changes in fair value. For non-credit losses, the Company reduces the investment to fair value through a charge to the statement of comprehensive loss, reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity. No such credit losses were recorded during the periods presented.

Leases

At the inception of an arrangement as lessee or lessor, the Company determines whether the arrangement is or contains a lease. Operating lease cost is recognized over the lease term on a straight-line basis. Variable lease cost and short-term leases (lease terms less than 12 months) are recognized as incurred. For both lessee and lessor arrangements, variable lease payments are the amounts owed by the Company to a lessor that are not fixed, such as reimbursement for common area maintenance and utilities costs, and are expensed when incurred. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option.

For lessee arrangements, operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received. Operating leases are recognized on the balance sheet as right-of-use assets, operating lease liabilities current and operating lease liabilities non-current.

The Company has elected the following lease policies at the inception of a lease: (1) for lessee and lessor arrangements within all asset classes, combine lease and non-lease components as a single component, with the lease expense recognized over the expected term on a straight-line basis and (2) for lessee arrangements, apply short-term lease exemption for all leases that qualify, where a right-of-use asset or lease liability will not be recognized for leases with terms of one year or less.

3. Investments and Fair Value of Financial Assets and Liabilities

As of March 31, 2022, investments by security type consisted of the following (in thousands):

March 31, 2022

Amortized Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Credit Losses

Fair Value

U.S. government treasury bills (due within one year)

 

$

78,470

 

$

 

$

(57)

$

$

78,413

$

78,470

$

$

(57)

$

$

78,413

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The Company had no investments as of December 31, 2021.

The following tables present the Company’s fair value hierarchy for its assets and liabilities, which are measured at fair value on a recurring basis (in thousands):

Fair value measurements at March 31, 2022 using:

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets:

 

  

 

  

 

  

  

Cash equivalents:

 

  

 

  

 

  

  

U.S. government money market funds

 

$

92,740

 

$

 

$

$

92,740

Investments:

 

 

 

 

  

U.S. government treasury bills

 

78,413

 

 

78,413

$

92,740

$

78,413

$

$

171,153

Fair value measurements at December 31, 2021 using:

    

Level 1 

    

Level 2 

    

Level 3

    

Total 

Assets:

 

  

 

  

 

  

  

Cash equivalents:

 

  

 

  

 

  

  

U.S government money market funds

 

$

217,009

 

$

 

$

$

217,009

$

217,009

$

$

$

217,009

U.S. government money market funds were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy. U.S. government treasury bills were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within the fair value hierarchy. There have been no changes to the valuation methods during the three months ended March 31, 2022. The Company evaluates transfers between levels at the end of each reporting period. There were no transfers between Level 1, Level 2 or Level 3 during the three months ended March 31, 2022.

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4. Property, Plant and Equipment, Net

Property, plant and equipment, net consisted of the following (in thousands):

    

March 31, 2022

    

December 31, 2021

    

Land

$

1,300

$

1,300

Manufacturing facility

35,735

33,203

Manufacturing equipment

8,861

8,831

Laboratory equipment

 

17,907

17,501

 

Computer equipment

 

 

2,710

 

2,645

 

Furniture and fixtures

1,306

1,281

Leasehold improvements

 

 

570

 

444

 

Construction-in-progress

 

 

2,686

 

4,181

 

 

 

71,075

 

69,386

 

Less: Accumulated depreciation and amortization

 

 

(19,415)

 

(17,856)

 

$

51,660

$

51,530

In February 2022, the Company placed into service $2.5 million of property, plant and equipment related to renovations to expand the Smithfield, Rhode Island manufacturing facility’s production capacity and operating capabilities. As of December 31, 2021, these additions were not ready for their intended use and continued to be included in construction-in-progress.

5. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

    

March 31, 2022

    

December 31, 2021

    

Accrued employee compensation and benefits

 

$

2,152

$

7,451

 

Accrued external research and development expenses

 

 

3,065

 

2,713

 

Accrued manufacturing facility expenses

 

 

995

 

2,349

 

Accrued general and administrative expenses

710

889

Other

 

 

830

 

670

 

$

7,752

$

14,072

6. Debt

On December 21, 2018 (the “Closing Date”), the Company entered into a loan and security agreement (as amended, the “Loan Agreement”) with Solar Capital Ltd., now SLR Investment Corp., as collateral agent for the lenders party thereto for an aggregate principal amount of $75.0 million. The aggregate principal amount was funded in three tranches of term loans of $25.0 million each. On the Closing Date, the Company made an initial borrowing of $25.0 million. In June 2019, the Company made a second borrowing of $25.0 million and in June 2020, the Company made a third and final borrowing of $25.0 million.

On June 22, 2021 (the “Amendment Closing Date”), the Company entered into an amendment (the “Amendment”) to its Loan Agreement. Pursuant to the Amendment, the Company and its lenders agreed to extend the interest-only period applicable to borrowings under the Loan Agreement from December 21, 2021 until July 1, 2024 and the final maturity date from December 21, 2023 until June 1, 2026. An additional tranche in the amount of $35.0 million is available at the request of the Company prior to the final maturity date, to be provided at the sole discretion of the lenders. The Amendment increases the LIBOR interest rate floor from 0.00% to 2.10%. Interest on the outstanding loan balance will accrue at a rate of 5.50%, plus the greater of 2.10% or the one-month U.S. LIBOR rate. Certain back-end fees are due to the lender at the time of final repayment based on the total funded term loans. The Company accrues the back-end fees that will be due at final repayment to outstanding debt by charges to interest expense over the term of the loans using the

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effective interest method. The term loans are subject to a prepayment fee of 1.00% if prepayment occurs within the first year subsequent to the Amendment Closing Date, 0.50% in the second year and 0.25% in the third year through final maturity date.

As the terms of the Amendment were not substantially different than the terms of the Loan Agreement, the Amendment was accounted for as a debt modification. In conjunction with the Amendment, the Company incurred issuance costs of $0.2 million payable to the lenders, which were recorded as an additional debt discount and will be amortized to interest expense over the remaining term, together with unamortized original issuance costs as of the Amendment Closing Date, using the effective interest method.

The Loan Agreement contains financial covenants that require the Company to maintain either a certain minimum cash balance or a minimum market capitalization threshold. The Company was in compliance with all such financial covenants as of May 10, 2022. The Loan Agreement contains customary representations, warranties and covenants and also includes customary events of default, including payment defaults, breaches of covenants, change of control and a material adverse change default. Upon the occurrence of an event of default, a default interest rate of an additional 4.00% per annum may be applied to the outstanding loan balances, and the lenders may declare all outstanding obligations immediately due and payable. Borrowings under the Loan Agreement are collateralized by substantially all of the Company’s assets, other than its intellectual property.

As of March 31, 2022, the estimated future principal payments due were as follows (in thousands):

Year ending December 31, 

    

  

2022 (nine months ending December 31)

$

2023

 

2024

18,750

2025

37,500

2026 and thereafter

18,750

$

75,000

7. Equity

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are not entitled to receive dividends, unless declared by the board of directors.

On July 20, 2018, the Company filed a restated certificate of incorporation in the State of Delaware, which, among other things, restated the number of shares of all classes of stock that the Company has authority to issue to 160,000,000 shares, consisting of (i) 150,000,000 shares of common stock, $0.001 par value per share, and (ii) 10,000,000 shares of preferred stock, $0.001 par value per share. The preferred stock will have such rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be determined by the Company’s board of directors upon issuance. The shares of preferred stock are currently undesignated.

On August 1, 2019, the Company entered into a Distribution Agreement (the “Distribution Agreement”) with J.P. Morgan Securities LLC, Jefferies LLC and SVB Leerink LLC (the “Sales Agents”), pursuant to which the Company may issue and sell, from time to time, shares of its common stock having an aggregate offering price of up to $100.0 million through the Sales Agents. The Company’s registration statement on Form S-3 filed on August 1, 2019 was declared effective on August 21, 2019. The Sales Agents may sell common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended, including sales made directly on or through the Nasdaq Global Select Market or any other existing trade market for the common stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related to prevailing market prices, or any other method permitted by law. The Sales Agents will be entitled to receive 3.0% of the gross sales price per share of common stock sold pursuant to the Distribution Agreement. As of March 31, 2022, no shares of common stock have been issued and sold pursuant to the Distribution Agreement.

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On March 18, 2021, the Company completed the March 2021 Offering, pursuant to which it issued and sold 6,896,552 shares of common stock. The aggregate net proceeds received by the Company from the March 2021 Offering were $187.2 million, after deducting underwriting discounts and commissions and other offering costs.

8. Stock-Based Compensation

Service-Based Stock Options

During the three months ended March 31, 2022, the Company granted options with service-based vesting conditions for the purchase of 2,455,341 shares of common stock with a weighted average exercise price of $6.74 per share and a weighted average grant-date fair value of $4.61 per share.

Stock-Based Compensation

The Company recorded stock-based compensation expense in the following expense categories of its condensed consolidated statements of operations and comprehensive loss (in thousands):

Three Months Ended March 31, 

    

2022

    

2021

    

Research and development expenses

 

$

3,477

$

2,531

 

General and administrative expenses

 

4,783

 

6,111

 

$

8,260

$

8,642

As of March 31, 2022, total unrecognized compensation cost related to the unvested stock-based awards was $61.0 million, which is expected to be recognized over a weighted average period of 2.6 years.

9. Commitments and Contingencies

License Agreement with the Whitehead Institute for Biomedical Research

The Company has a license agreement with the Whitehead Institute for Biomedical Research (“WIBR”), as amended, under which the Company has been granted an exclusive, sublicensable, nontransferable license under certain patent families related to the development of the Company’s red blood cell therapies (as amended, the “WIBR License”). The Company is obligated to pay WIBR annual license maintenance fees of less than $0.1 million, as well as patent-related costs, including legal fees, and low single-digit royalties based on annual net sales of licensed products and licensed services by the Company and its sublicensees. Based on the progress the Company makes in the advancement of products covered by the licensed patent rights, the Company is required to make aggregate milestone payments of up to $1.6 million upon the achievement of specified preclinical, clinical and regulatory milestones. In addition, the Company is required to pay to WIBR a percentage of the non-royalty payments that it receives from sublicensees of the patent rights licensed by WIBR. This percentage varies from low single-digit to low double-digit percentages and will be based upon the clinical stage of the product that is the subject of the sublicense. Royalties shall be paid by the Company on a licensed product-by-licensed product and country-by-country basis, beginning on the first commercial sale of such licensed product in such country until expiration of the last valid patent claim covering such licensed product in such country.

The Company has the right to terminate the WIBR License in its entirety, on a patent-by-patent or country-by-country basis, at will upon three months’ notice to WIBR. WIBR may terminate the agreement upon breach of contract or in the event of the Company’s bankruptcy, liquidation, insolvency or cessation of business related to the license.

401(k) Plan

In January 2018, the Company established a defined-contribution plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan covers all employees who meet defined minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. The Company

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makes matching contributions at a rate of 50% of each employee’s contribution up to a maximum employee contribution of 6% of eligible plan compensation. For the three months ended March 31, 2022 and 2021, the Company made matching contributions of $0.4 million and $0.3 million, respectively.

Indemnification Agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, contract research organizations, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. The Company has not incurred any material costs as a result of such indemnifications and is not currently aware of any indemnification claims.

Legal Proceedings

The Company is not currently party to any material legal proceedings. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to such legal proceedings.

10. Net Loss per Share

Basic and diluted net loss per share was calculated as follows (in thousands, except share and per share amounts):

Three Months Ended March 31, 

    

2022

    

2021

    

Numerator:

 

  

 

  

 

Net loss

$

(52,412)

$

(42,330)

 

  

 

  

Denominator:

 

  

 

  

Weighted average common shares outstanding, basic and diluted

 

90,149,049

 

82,314,577

Net loss per share, basic and diluted

$

(0.58)

$

(0.51)

The Company’s potential dilutive securities have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares from the periods in the table above, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

March 31, 

    

2022

    

2021

    

Unvested restricted common stock

 

1,188,074

 

724,854

 

Stock options to purchase common stock

 

19,428,320

 

17,416,717

 

 

20,616,394

 

18,141,571

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Objective

The purpose of the following discussion and analysis is to provide material information relevant to an assessment of our financial condition and results of operations from management’s perspective, including to describe and explain key trends, events and other factors that impacted our reported results and that are reasonably likely to impact our future performance.

As such, the following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission, or SEC, on February 25, 2022. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

Overview

We are a clinical-stage biopharmaceutical company that is biologically engineering red blood cells or RBCs, to develop an entirely new class of cellular medicines called Red Cell Therapeutics, or RCTs, for the treatment of cancer and autoimmune diseases. Based on our vision that human red blood cells are the foundation of the next significant innovation in medicine, we have developed a programmable and highly versatile platform, which we call the RED PLATFORM, to biologically engineer and culture allogeneic cellular therapies that enable multiple applications, or modalities. We believe that the advantage of the platform is that once a modality is validated, as we have demonstrated with our lead product candidate RTX-240 for the treatment of advanced cancers, we increase the likelihood that all the programs within that modality will work, underscoring the broad potential of the RED PLATFORM to help patients.

As part of the American Association for Cancer Research Annual Meeting in April 2022, we presented updated clinical data from our ongoing Phase 1 arm of RTX-240 in patients with locally advanced or relapsed/refractory solid tumors, which we believe provides clinical validation for our RED PLATFORM and supports the development of our entire oncology pipeline of RCTs. We continue to enroll patients in our Phase 1 arm evaluating RTX-240 in combination with pembrolizumab in patients with advanced solid tumors and have added an additional cohort to evaluate the combination in patients with non-small cell lung cancer (NSCLC) and renal cell carcinoma (RCC) to inform a Phase 2 clinical trial. We plan to report initial clinical data for RTX-240 in combination with pembrolizumab in advanced solid tumors and data from the initial NSCLC and RCC patients enrolled in the expansion cohort during the second half of 2022. In January 2022, we began dosing patients in the Phase 1/2 clinical trial of RTX-224, our second broad immune agonist, for the treatment of patients with certain relapsed/refractory or locally advanced solid tumors, including non-small cell lung cancer, cutaneous melanoma, head and neck squamous cell carcinoma, urothelial (bladder) carcinoma and triple-negative breast cancer. We expect to report initial clinical results from the Phase 1 clinical trial of RTX-224 by year-end 2022 or during the first quarter of 2023.

At our Investor Day in December 2021, we shared preclinical proof of concept data, demonstrating tolerance induction and the potential for bystander suppression in two stringent type 1 diabetes preclinical models. These findings are potentially translatable beyond type 1 diabetes to multiple autoimmune diseases, including our priority target indications such as multiple sclerosis and celiac disease.

We continue to advance our manufacturing capabilities and achieved significant manufacturing milestones, including successfully scaling our manufacturing to 200L bioreactors in support of a potential future pivotal trial for RTX-240 and potential commercialization, as of April 2022. This results in a process at a scale four times our previous 50L bioreactor process. We continue to provide uninterrupted clinical supply for the RTX-240 clinical trial, the Phase 1 RTX-321 trial and the Phase 1 RTX-224 trial. We have the potential to significantly expand our manufacturing capabilities and plan to

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stage additional investments based on future needs and in preparation for potential pivotal trial and eventual commercialization.

Highlights of our clinical product candidates, RTX-240, RTX-321 and RTX-224 are described further below.

Broad Immune Stimulation for the Treatment of Cancer

RTX-240

In April 2022, we announced updated clinical data from the ongoing Phase 1/2 clinical trial of monotherapy RTX-240 in advanced solid tumors that we believe provides clinical validation of the RED PLATFORM’s potential ability to mimic the human immune system and stimulate adaptive and innate immunity to generate clinical responses in cancer patients with refractory disease. RTX-240 is an allogeneic, off-the-shelf cellular therapy product candidate that is engineered to simultaneously present hundreds of thousands of copies of the costimulatory molecule 4-1BB ligand (4-1BBL) and IL-15TP (trans-presentation of IL-15 on IL-15Rα) in their native forms. RTX-240 is designed to broadly stimulate the immune system by activating and expanding both NK and CD8+ memory T cells to generate a potent anti-tumor response.

The data reported in April 2022 at the American Association for Cancer Research Annual Meeting included initial safety (n=34) and efficacy (n=27) data from the monotherapy RTX-240 Phase arm in relapsed/refractory or locally advanced solid tumors. Nine dose cohorts were completed at the time of the data cutoff on March 4, 2022. Enrollment continues in the 5e10 Q3W dose cohort.

As of the cutoff date, disease control was observed in 10 patients (1 partial response, 2 unconfirmed partial responses and 7 with stable disease), 9 of whom had previously experienced disease progression on prior anti-PD-1/anti-PD-L1 therapy.

There were three best responses of partial response (PR) in NSCLC, anal cancer and uveal melanoma patients:

an unconfirmed PR (uPR) with 41% decrease of all target lesions and a notable decrease of an external protruding chest wall mass in a patient with NSCLC whose disease had progressed on prior anti-PD-L1 therapy;
a confirmed PR with a 54% reduction in the target lesions in a patient with metastatic anal cancer whose disease had progressed on anti-PD-L1 therapy; and
a uPR with 100% decrease of the target hepatic lesion and resolution of multiple non-target hepatic lesions in a patient with metastatic uveal melanoma whose disease had progressed on anti-PD-1 therapy.

Amount the patients with stable disease (SD), there were 3 with metastatic NSCLC and 2 with RCC across the 3e10 cohorts, supporting the Company’s decision to expand the Phase 1 arm of RTX-240 plus pembrolizumab to NSCLC and RCC patients. One patient each with NSCLC and RCC remained on monotherapy treatment with SD greater than 6 months as of the cutoff date.

As of the cutoff date, RTX-240 has been shown to have been generally well tolerated with no treatment-related or investigator-identified immune-related Grade 3/4 adverse events (AEs) and no dose-limiting toxicities.

Based on the totality of clinical, tolerability and pharmacodynamic data, a recommended monotherapy Phase 2 dose of 5e10 cells administered every 3 weeks was selected. This dose will be further explored in the combination expansion cohort of NSCLC and RCC patients. Enrollment continues in the monotherapy arm of the trial at the recommended Phase 2 dose of 5e10 cells administered every 3 weeks.

In April 2022, we also announced final clinical results from the Phase 1 arm of monotherapy RTX-240 in relapsed/refractory AML. As of the cutoff date of March 4, 2022, seventeen patients were enrolled across 4 dose levels. No DLTs were observed and there were 3 treatment-related Grade 3/4 adverse events. There were no investigator-

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reported immune-related AEs. Five patients had SD greater than 3 months, and 1 patient had a significant blast count reduction (53% to 6%).

In this study, RTX-240 showed activation and expansion of NK and T cells with favorable safety results, which continues to support the proposed mechanism of action of RTX-240. Based on these data, we believe RTX-240 could improve outcomes for AML patients when used as maintenance therapy for patients in remission following high-dose chemotherapy and/or stem cell transplantation and that we have established the necessary foundation to evaluate RTX-240 in the maintenance setting for the treatment of AML. However, to focus our resources on advancing RTX-240 in combination with pembrolizumab in NSCLC and RCC, we do not plan to pursue a separate clinical trial in AML in the near-term.

In June 2021, we began dosing patients in the arm of our RTX-240 clinical trial that is evaluating RTX-240 as a combination therapy with pembrolizumab for the treatment of patients with relapsed/refractory or locally advanced solid tumors. We believe that RTX-240, with its mechanism of action as a broad immune agonist, may have synergy with immune checkpoint inhibition and could potentially overcome resistance to PD-1 inhibition. Based on the updated clinical results from the ongoing Phase 1 arm of monotherapy RTX-240 in advanced solid tumors, we expanded the Phase 1 arm of RTX-240 in combination with pembrolizumab to evaluate the combination in up to 20 patients with NSCLC and RCC to inform a Phase 2 clinical trial. Patients with two or fewer prior treatment regimens in the metastatic setting are eligible for the trial. If patients previously have received a PD-1/PD-L1 regimen, a prior response of either SD ≥6 months, PR or complete response is required. We expect to report initial clinical results from this arm of the ongoing Phase 1/2 clinical of RTX-240 in advanced solid tumors and data from the initial enrolled NSCLC and RCC patients during the second half of 2022.

RTX-224

RTX-224 is an allogeneic cellular therapy that is engineered to express hundreds of thousands of copies of 4-1BBL and interleukin-12, or IL-12, on the cell surface. RTX-224 is designed as a broad immune agonist of both adaptive and innate responses, designed to activate CD8+ and CD4+ T cells, activate and expand NK cells, and promote antigen presentation. It is expected to produce a broad and potent anti-tumor T cell response and an innate immune response and have anti-tumor activity in those tumor types with known sensitivity to T cell killing, including tumor types with high mutational burden, PD-L1 expression and known responsiveness to checkpoint inhibitors. The combination of IL-12 and 4-1BBL has the potential to broadly induce an immune response in patients with solid tumors and may serve as the bridge between the innate and adaptive immune systems.

In January 2022, we began dosing patients in the Phase 1/2 clinical trial of RTX-224 for the treatment of patients with certain relapsed/refractory or locally advanced solid tumors, including non-small cell lung cancer, cutaneous melanoma, head and neck squamous cell carcinoma, urothelial (bladder) carcinoma and triple-negative breast cancer. We expect to report initial clinical results from the Phase 1 trial by year-end 2022 or during the first quarter of 2023.

In November 2021, we presented preclinical data for RTX-224 at the Society for Immunotherapy of Cancer’s 36th Annual Meeting, showing that RTX-224 activated immune cells in the spleen and blood, leading to their trafficking into the tumor microenvironment to deliver an anti-tumor effect in our preclinical models.

Antigen-Specific Immune Stimulation for the Treatment of Cancer

RTX-321

RTX-321 is an allogeneic, off-the-shelf artificial antigen presenting cells, or aAPC, therapy product candidate that is engineered to induce a tumor-specific immune response by expanding antigen-specific T cells. RTX-321 expresses hundreds of thousands of copies of an HPV 16 peptide antigen bound to major histocompatibility complex class I proteins, the costimulatory molecule 4-1BBL and the cytokine IL-12 on the cell surface to mimic human T cell-APC interactions.

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In May 2022, we announced that given the additional investment required to dose escalate and the eventual need for a companion diagnostic for patient selection for RTX-321, we are focusing our resources at this time on advancing our broad agonism approach with RTX-240 and RTX-224. We believe RTX-321 has shown promising pharmacodynamic effects with dramatic expansion of CD4+ T cells observed, which is one of the key cells involved in the mechanism by which IL-12 stimulates a broad anti-tumor response. Importantly, RTX-321 was generally well tolerated with no dose-limiting toxicities and no treatment-related AE’s, giving us confidence that we may be able to safely exploit IL-12’s potent anti-tumor activity with RTX-224, which expresses higher copy numbers of IL-12 on the cell surface than does RTX-321.

Three dose cohorts were completed (n=9) with one patient with anal squamous cell carcinoma with SD ongoing at 16 weeks at the highest dose cohort to date of 1e10 administered every three weeks. Prior to enrollment, the patient experienced disease progression on anti-PD-1 therapy. Consistent with the combined mechanism of action of IL-12 and 4-1BBL, increases in activated CD4+ T cells, activated CD8+ T cells and activated NK cells were observed at the higher dose levels.

Antigen-Specific Immune Tolerance for the Treatment of Autoimmune Diseases

RTX-T1D (Type 1 Diabetes)

In December 2021, we shared preclinical proof of concept data, demonstrating tolerance induction and the potential for bystander suppression in two stringent type 1 diabetes preclinical models. Specifically, we established efficacy in the BDC2.5 adoptive transfer model with data showing that an RTX-T1D surrogate reversed established inflammation and induced two types of regulatory T cells, resulting in protection against re-challenge. Moreover, the data showed that repeated dosing could extend duration of disease protection to 5 months (the endpoint of the study). We also showed early efficacy in the non-obese diabetic mouse, or NOD, preclinical model. Results at 25 weeks showed that a mouse surrogate of RTX-T1D that delivered only two antigens delayed disease. As disease in NOD mice is caused by many autoantigens, these results demonstrate the potential for bystander suppression. These findings are potentially translatable beyond type 1 diabetes to multiple autoimmune diseases, including other Rubius’ high priority target indications such as multiple sclerosis and celiac disease.

We intend to present these results in a peer-reviewed setting and expect to provide details of our development timeline later in 2022.

Manufacturing

Using our RED PLATFORM, we are utilizing our universal engineering and manufacturing processes to advance a broad pipeline of RCT product candidates into clinical trials in cancer and autoimmune diseases. Common design and manufacturing elements of our RCTs should enable us to achieve significant advantages in product development.

To more efficiently develop new RCTs designed to treat different diseases, we modify one of our initial manufacturing steps in which we add a gene or genes of interest that encode biotherapeutic proteins within the cell or on the cell surface. Using this approach, we have expressed more than 1,000 different therapeutic proteins since platform inception. This programmable process allows for the repeated generation of product candidates and enables us to leverage common CMC and toxicology data packages across our therapies.

Recognizing the importance of controlling our own manufacturing capabilities to produce consistent and reproducible product at greater scale, we acquired, renovated and operationalized a manufacturing facility in Smithfield, RI, which is currently providing cGMP supply for our ongoing Phase 1 clinical trials: RTX-240 in advanced solid tumors, RTX-240 in combination with pembrolizumab and RTX-224 in advanced solid tumors.

We have industrialized the production of RCTs by developing and scaling up a manufacturing process by which hematopoietic progenitor cells are expanded, then biologically engineered and subsequently differentiated into erythroid cells (RCTs) that express biotherapeutic proteins within the cell or on the cell surface. The RED PLATFORM allows us to generate a wide variety of allogeneic, ready-to-use RCT product candidates with a universal and proprietary process.

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We have recently achieved the following manufacturing milestones:

successfully scaled our manufacturing to 200L bioreactors in support of a potential future pivotal trial for RTX-240 and potential commercialization. This results in a process at a scale four times our previous 50L bioreactor process;
increased cells produced per batch in 50L bioreactors by four times that of 2020, enabling uninterrupted clinical supply for three Phase 1 arms of the RTX-240 clinical trial; and
introduced frozen drug substance for RTX-224, potentially enabling inventory storage for more than two years.

Additional accomplishments include:

greater than 90% lot success rate for RTX-240 and RTX-321 clinical supply in the 50L bioreactor;
hundreds of doses administered across all three arms of our RTX-240 Phase 1/2 trial, RTX-321 Phase 1 trial and RTX-224 Phase 1/2 trial;
high transduction efficiency, with greater than 90% of cells transduced with therapeutic proteins; and
highly consistent protein expression (dual or triple).

We have the potential to significantly expand our manufacturing capabilities and plan to stage additional investments based on future needs and in preparation for potential pivotal trial and eventual commercialization.

Funding Overview

Since our inception, we have focused substantially all of our resources on building our proprietary RED PLATFORM, establishing and protecting our intellectual property portfolio, conducting research and development activities, developing our manufacturing process and manufacturing product candidate material, organizing and staffing our company, business planning, raising capital and providing general and administrative support for these operations. We do not have any products approved for sale and have not generated any revenue from product sales. To date, we have funded our operations with proceeds from the sale of preferred stock and issuance of debt and with proceeds from our public offerings.

On July 20, 2018, we completed our IPO pursuant to which we issued and sold 12,055,450 shares of common stock, inclusive of 1,572,450 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares. We received proceeds of $254.3 million after deducting underwriting discounts and commissions and other offering costs. In August 2019, we entered into a Distribution Agreement with J.P. Morgan Securities LLC, Jefferies LLC and SVB Leerink LLC with respect to an at-the-market, or ATM, offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, having aggregate gross proceeds of up to $100.0 million. We have not yet sold any shares of our common stock under the ATM offering program. In March 2021, we completed an underwritten public offering, or the March 2021 Offering, pursuant to which we issued and sold 6,896,552 shares of common stock. We received proceeds of $187.2 million, after deducting underwriting discounts and commissions and other offering costs.

Since our inception, we have incurred significant operating losses. Our ability to generate any product revenue or product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates. We reported net losses of $52.4 million for the three months ended March 31, 2022 and $196.5 million for the year ended December 31, 2021. As of March 31, 2022, we had an accumulated deficit of $729.4 million. We expect to continue to incur significant expenses and operating losses for at

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least the next several years. We expect that our expenses and capital requirements will increase in connection with our ongoing activities, particularly if, and as, we:

conduct clinical trials for our product candidates and to the extent we continue to experience delays, setbacks or disruptions to our preclinical studies, clinical trials or clinical supply chain due to the ongoing COVID-19 pandemic;
further develop our RED PLATFORM;
continue to discover and develop additional product candidates;
maintain, expand and protect our intellectual property portfolio;
hire additional clinical, scientific, manufacturing and commercial personnel;
expand in-house manufacturing capabilities, including through the operation and any future renovation or expansion of our manufacturing facility;
establish a commercial manufacturing source and secure supply chain capacity sufficient to provide commercial quantities of any product candidates for which we may obtain regulatory approval;
acquire or in-license other product candidates and technologies;
seek regulatory approvals for any product candidates that successfully complete clinical trials;
establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain regulatory approval; and
add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts, as well as to continue to support the requirements of a public company.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing and distribution. Further, we expect to continue to incur costs associated with operating as a public company.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public and private equity financings, debt financings, borrowings under our credit facility, collaborations, strategic alliances and marketing, distribution and licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. We implemented certain cost reduction actions in April 2022, which are intended to focus our capital on advancing our cancer and autoimmune programs and technology platform. If we are unable to obtain additional funding, we will implement further cost reduction actions that delay, scale back or discontinue some or all of our research and development programs and technology platform activities in order to further extend our forecasted cash runway. These actions could adversely affect our business prospects. As of May 10, 2022, the issuance date of the interim condensed consolidated financial statements, we expect that our cash, cash equivalents and investments will be sufficient to fund our operating expenses, capital expenditure requirements and debt service payments into the second half of 2023.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain

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profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

See “—Liquidity and Capital Resources.”

Impact of the Ongoing COVID-19 Pandemic

Since March of 2020 and throughout the ongoing COVID-19 pandemic, we have implemented various precautionary measures to protect the health and safety of our employees, partners and prospective clinical trial participants, to comply with applicable national, state and local governmental orders, proclamations and/or directives in effect at any time aimed at minimizing the spread of COVID-19 and to minimize disruption to our operations. Such measures have included, at certain times, the elimination of business travel, shifting to remote work wherever possible and implementing rotating laboratory work schedules to reduce the number of people onsite at our facilities, advance ordering of certain raw materials impacted by delays in the global supply chain, as well as working with our external partners and clinical sites to utilize virtual clinical trial site training and monitoring, minimizing patient visits and instituting telemedicine to minimize patient exposure. We will continue to use these, and other precautionary measures, as required until such time as the ongoing COVID-19 pandemic, including any subsequent outbreak whether or not due to emerging variants thereof, is contained.

While the ongoing COVID-19 pandemic has impacted manufacturing, supply chain and clinical trial activities worldwide, including those of our suppliers, vendors and clinical trial sites, these disruptions have not significantly impacted our results of operations to date. The ultimate impact on our operations, however, is unknown and will depend on future developments, such as the duration, spread and intensity of the pandemic, among others, which are highly uncertain and cannot be predicted with confidence. In particular, global developments concerning COVID-19, including the identification of new strains of coronavirus, and the magnitude of interventions to contain the spread of viruses, such as government-mandated quarantines, shelter-in-place mandates, restrictions on travel, shutdowns for non-essential businesses, requirements regarding social distancing, impact of government-imposed restrictions on the global supply chain, including through use of the Defense Production Act, distribution of vaccines and other public health safety measures, will determine the impact of the pandemic on our business. We are continuing to monitor the latest developments regarding the ongoing COVID-19 pandemic and its impact on our business, financial condition, results of operations and prospects. However, any resulting financial impact cannot be reasonably estimated at this time and may have a material adverse impact on our business, financial condition and results of operations.

Components of Our Results of Operations

Revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the near future. If our development efforts for our product candidates are successful and result in regulatory approval or license or collaboration agreements with third parties, we may generate revenue in the future from product sales, payments from collaboration or license agreements that we may enter into with third parties, or any combination thereof.

Operating Expenses

Research and Development Expenses

Research and development expenses consist of costs incurred for our research activities, including our drug discovery efforts, and the development and manufacturing of our product candidates, which include:

employee-related expenses, including salaries, related benefits and stock-based compensation expense for employees engaged in research and development functions;

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expenses incurred in connection with the preclinical and clinical development of our product candidates and research programs, including under agreements with third parties, such as consultants, contractors and contract research organizations, or CROs;
the cost of developing and scaling our manufacturing process and manufacturing product candidates for use in our preclinical studies and clinical trials, including those produced in our manufacturing facility as well as components that are produced under agreements with third parties, such as consultants, contractors and any contract manufacturing organizations, or CMOs, that we may engage;
laboratory supplies and research materials;
facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities and insurance; and
payments made under third-party licensing agreements.

We expense research and development costs as incurred. Advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.

Our direct research, manufacturing and development expenses are tracked on a program-by-program basis for clinical candidates. These consist mostly of fees, reimbursed materials, testing and other costs paid to consultants, contractors, CMOs and CROs, as well as the cost of materials incurred for internal manufacturing. In addition, we allocate the cost of operating our manufacturing facility to research and development program costs, consisting of associated personnel costs, other than stock-based compensation expense, and manufacturing facility costs, including depreciation. We do not allocate costs associated with our platform development, early-stage research and shared research and development, including associated personnel costs, laboratory supplies, non-manufacturing facilities expenses and other indirect costs, to research and development programs, because these costs are deployed across multiple programs and our technology platform and, as such, are not separately classified.

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, due to the increased size and duration of later stage clinical trials. Therefore, we have reduced preclinical and other development activities to advance our current clinical programs. As a result, we expect research and development expenses related to those preclinical and other development activities to decrease while we focus on achieving clinical endpoints. The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the following:

the timing and progress of preclinical and clinical development activities;
the number and scope of preclinical and clinical programs we decide to pursue;
our ability to raise the additional funds necessary to complete preclinical and clinical development of and commercialize our drug candidates;
the progress of the development efforts of parties with whom we may enter into collaboration arrangements;
our ability to maintain our current research and development programs and to establish new ones;
our ability to establish new licensing or collaboration arrangements;
the successful initiation and completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the U.S. Food and Drug Administration, or FDA, or any comparable foreign regulatory authority;

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the continued impact of the ongoing COVID-19 pandemic on our operations;
the receipt and related terms of regulatory approvals from applicable regulatory authorities;
the availability of specialty raw materials for use in production of our product candidates;
our ability to consistently manufacture our product candidates for use in clinical trials;
our ability to operate a manufacturing facility, or secure manufacturing supply through relationships with third parties;
our ability to obtain and maintain patents, trade secret protection and regulatory exclusivity, both in the United States and internationally;
our ability to protect our rights in our intellectual property portfolio;
our ability to successfully commercialize our product candidates, if and when approved;
our ability to obtain and maintain third-party insurance coverage and adequate reimbursement;
the acceptance of our product candidates, if approved, by patients, the medical community and third-party payors;
competition with other products; and
a continued acceptable safety profile of our therapies following approval.

A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any of our product candidates.

General and Administrative Expenses

General and administrative expenses include salaries and related costs, including stock-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs, as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services.

Other Income (Expense)

Interest Income

Interest income consists of interest earned on our invested cash balances.

Interest Expense

Interest expense consists of interest owed on outstanding borrowings under our Loan Agreement (as defined below), as well as amortization of debt discount.

Other Income, Net

Other income, net consists of miscellaneous income and expense unrelated to our core operations.

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Income Taxes

Since our inception, we have not recorded any income tax benefits for the net losses we have incurred in each year or for our research and development tax credits generated, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss, or NOL, carryforwards and tax credits will not be realized. As of December 31, 2021, we had U.S. federal and state net operating loss carryforwards of $534.2 million and $534.8 million, respectively, which may be available to offset future taxable income. The federal NOLs include $37.2 million, which expire at various dates through 2037, and $497.0 million, which carryforward indefinitely. The state NOLs expire at various dates through 2041. As of December 31, 2021, we also had U.S. federal and state research and development tax credit carryforwards of $22.7 million and $15.6 million, respectively, which may be available to offset future tax liabilities and begin to expire in 2034 and 2026, respectively. We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.

Results of Operations

Comparison of the Three Months Ended March 31, 2022 and 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021:

 

Three Months Ended March 31, 

 

2022

2021

Change

(in thousands)

Revenue

$

$

$

Operating expenses:

Research and development

38,299

 

27,677

 

10,622

General and administrative

12,563

 

13,240

 

(677)

Total operating expenses

50,862

 

40,917

 

9,945

Loss from operations

(50,862)

 

(40,917)

 

(9,945)

Other income (expense):

Interest income

48

 

26

 

22

Interest expense

(1,629)

 

(1,748)

 

119

Other income, net

31

 

309

 

(278)

Total other income (expense), net

(1,550)

 

(1,413)

 

(137)

Net loss

$

(52,412)

$

(42,330)

$

(10,082)

Research and Development Expenses

 

Three Months Ended March 31, 

 

2022

2021

Change

(in thousands)

Research and development program expenses:

Rare disease

$

$

197

$

(197)

Cancer

17,011

11,742

5,269

Platform development, early-stage research and unallocated expenses:

Personnel-related

8,832

6,388

2,444

Stock-based compensation expense

3,477

2,531

946

Contract research and development

2,605

1,328

1,277

Laboratory supplies and research materials

2,725

1,759

966

Facility related and other

3,649

3,732

(83)

Total research and development expenses

$

38,299

$

27,677

$

10,622

Research and development expenses were $38.3 million for the three months ended March 31, 2022, compared to $27.7 million for the three months ended March 31, 2021. The increase in direct costs of $5.3 million related to RTX-240, RTX-321 and RTX-224, was principally related to clinical research organization, or CRO, costs and internal

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manufacturing costs incurred in connection with all three programs. We have prioritized the advancement of clinical endpoints and, therefore, expect these costs to decrease in future periods. Platform development, early-stage research and unallocated expenses increased by $5.6 million principally due to increases of $2.4 million in personnel-related costs and $0.9 million in stock-based compensation related to the increase in headcount to support our expanded operations. Additionally, increases of $1.3 million in contract research and development and $1.0 million in laboratory supplies and research materials are related to drug discovery activities and platform development.

General and Administrative Expenses

 

Three Months Ended March 31, 

 

2022

2021

Change

(in thousands)

Personnel-related

$

3,486

$

3,125

$

361

Stock-based compensation expense

4,783

6,111

(1,328)

Professional and consultant fees

2,632

2,275

357

Facility related and other

1,662

1,729

(67)

Total general and administrative expenses

$

12,563

$

13,240

$

(677)

General and administrative expenses were $12.6 million for the three months ended March 31, 2022, compared to $13.2 million for the three months ended March 31, 2021. The decrease in general and administrative expenses of $0.7 million was primarily due to a decrease in stock-based compensation expense of $1.3 million, which was driven by stock option awards that fully vested during the third quarter of 2021. The reduction in stock-based compensation was offset by an increase in personnel-related expenses of $0.4 million driven by additions to headcount in our general and administrative function and an increase in professional and consultant fees of $0.4 million resulting primarily from additional costs to support operations as a public company.

Interest Income

Interest income was less than $0.1 million for the three months ended March 31, 2022, compared to less than $0.1 million for the three months ended March 31, 2021. The change in interest income was not significant during the period.

Interest Expense

Interest expense was $1.6 million for the three months ended March 31, 2022, compared to $1.7 million for the three months ended March 31, 2021. The change in interest expense was not significant during the period.

Other Income, Net

Other income, net was less than $0.1 million for the three months ended March 31, 2022, compared to $0.3 million for the three months ended March 31, 2021. The decrease in other income, net was due to the expiration of our sublease agreement in the third quarter of 2021, concurrent with the expiration of the associated lease.

Liquidity and Capital Resources

Since our inception, we have incurred significant operating losses. We have not yet commercialized any of our product candidates and we do not expect to generate revenue from sales of any product candidates for several years, if at all. To date, we have funded our operations with proceeds from the sale of preferred stock, with the issuance of debt, with proceeds from our IPO and, most recently, with proceeds from our March 2021 Offering, described and defined further below. As of March 31, 2022, we had cash, cash equivalents and investments of $176.5 million. In July 2018, we completed our IPO, pursuant to which we issued and sold 12,055,450 shares of common stock, inclusive of 1,572,450 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares. We received proceeds of $254.3 million, after deducting underwriting discounts and commissions and other offering costs. In December 2018, we entered into a loan and security agreement, which was amended in June 2021, which provides for aggregate borrowings of up to $75.0 million. As of March 31, 2022, $75.0 million is outstanding under the agreement and principal payments

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commence in July 2024. In March 2021, we completed the March 2021 Offering, pursuant to which we issued and sold 6,896,552 shares of common stock. We received proceeds of $187.2 million, after deducting underwriting discounts and commissions and other offering costs.

Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented:

 

Three Months Ended March 31, 

 

2022

2021

(in thousands)

Cash used in operating activities

$

(47,135)

$

(38,739)

Cash provided by (used in) investing activities

(80,847)

41,752

Cash provided by financing activities

76

193,908

Net increase in cash, cash equivalents and restricted cash

$

(127,906)

$

196,921

Operating Activities

During the three months ended March 31, 2022, operating activities used $47.1 million of cash, primarily resulting from our net loss of $52.4 million, offset by net non-cash charges of $10.0 million, predominantly consisting of stock-based compensation expense. Net cash used in our operating assets and liabilities for the three months ended March 31, 2022 consisted of a $6.3 million decrease in accounts payable, accrued expenses and other current liabilities, other long-term liabilities and operating lease liabilities, offset by a decrease in prepaid expenses and other current assets and operating lease, right-of-use asset of $1.5 million.

During the three months ended March 31, 2021, operating activities used $38.7 million of cash, primarily resulting from our net loss of $42.3 million, offset by net non-cash charges of $10.9 million, predominantly consisting of stock-based compensation expense. Net cash used in our operating assets and liabilities for the three months ended March 31, 2021 consisted of a $8.3 million decrease in accounts payable, accrued expenses and other current liabilities, other long-term liabilities and operating lease liabilities, offset by a decrease in prepaid expenses and other current assets and operating lease, right-of-use asset of $1.0 million.

Investing Activities

During the three months ended March 31, 2022, net cash used in our investing activities was $80.8 million, consisting of purchases of investments of $78.4 million and purchases of property, plant and equipment of $2.4 million. Our cash purchases of property, plant and equipment primarily relate to renovation expenditures incurred at our manufacturing facility in Smithfield, Rhode Island.

During the three months ended March 31, 2021, net cash provided by investing activities was $41.8 million, consisting of sales and maturities of investments of $42.5 million, offset by purchases of property, plant and equipment of $0.7 million. Our cash purchases of property, plant and equipment relate to the purchase of computer and laboratory equipment installed in our manufacturing facility in Smithfield, Rhode Island and our laboratory space in Cambridge, Massachusetts.

Financing Activities

During the three months ended March 31, 2022, net cash provided by financing activities of $0.1 million consisted of proceeds received from issuance of common stock upon exercise of stock options of $0.1 million.

During the three months ended March 31, 2021, net cash provided by financing activities of $193.9 million consisted primarily of proceeds of $188.0 million, net of commissions and underwriting discounts, and proceeds received from issuance of common stock upon exercise of stock options of $5.9 million from the Offering completed in March 2021.

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Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of March 31, 2022 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods:

 

Payments Due by Period

 

Total

Less Than 1 Year

1 to 3 Years

3 to 5 Years

More Than 5 Years

(in thousands)

Operating lease commitments (1)

$

44,298

$

9,082

$

15,097

$

7,873

$

12,246

Debt obligations (2)

97,739

5,700

38,813

53,226

Total

$

142,037

$

14,782

$

53,910

$

61,099

$

12,246

(1)Amounts in table reflect payments due for our leases of office and laboratory space in Cambridge, Massachusetts under two operating lease agreements that expire in January 2027 and August 2028, respectively.

(2)Amounts in table reflect the contractually required principal and interest payments payable under the Loan Agreement. For purposes of this table, the interest due under the Loan Agreement was calculated using an assumed interest rate of 8.86% per annum, which was the interest rate in effect as of March 31, 2022.

Loan and Security Agreement

In December 2018, or the Closing Date, we entered into a loan and security agreement, or, as amended, the Loan Agreement, with SLR Investment Corp. (formerly Solar Capital Ltd.) as collateral agent for the lenders party thereto for an aggregate principal amount of $75.0 million. The aggregate principal amount was funded in three tranches of term loans of $25.0 million each, on the Closing Date, in June 2019 and in June 2020.

On June 22, 2021, or the Amendment Closing Date, we entered into an amendment, or the Amendment, to our Loan Agreement. Pursuant to the Amendment, we and our lenders agreed to extend the interest-only period in respect of our borrowings under the Loan Agreement from December 21, 2021 until July 1, 2024. The parties also agreed to extend the final maturity date on which all of our outstanding obligations under the Loan Agreement become due to June 1, 2026 (from December 21, 2023 originally). An additional tranche in the amount of $35.0 million is available to us prior to the final maturity date, to be provided at the sole discretion of the lenders. Interest on the outstanding loan balance will accrue at a rate of 5.50%, plus the greater of 2.10% or the one-month U.S. LIBOR rate. Monthly principal payments will commence on July 1, 2024 and will be amortized over the following 24 months. Certain back-end fees are due to the lender at the time of final repayment based on the total funded term loans. The term loans are subject to a prepayment fee of 1.00% if prepayment occurs within the first year subsequent to the Amendment Closing Date, 0.50% in the second year and 0.25% in the third year through final maturity date.

The Loan Agreement contains financial covenants that require us to maintain either a certain minimum cash balance or a minimum market capitalization threshold. We were in compliance with all such financial covenants as of March 31, 2022. The Loan Agreement contains customary representations, warranties and covenants and also includes customary events of default, including payment defaults, breaches of covenants, change of control and a material adverse change default. Upon the occurrence of an event of default, a default interest rate of an additional 4.00% per annum may be applied to the outstanding loan balances, and the lenders may declare all outstanding obligations immediately due and payable. Borrowings under the Loan Agreement are collateralized by substantially all of our assets, other than our intellectual property.

Common Stock Sales Agreement

On August 1, 2019, we entered into a Distribution Agreement, or the Distribution Agreement, with multiple sales agents, pursuant to which the Company may offer and sell to or through the agents, from time to time, shares of the Company's common stock, par value $0.001 per share, having an aggregate gross sales price of up to $100.0 million. Sales, if any, of the Company's shares of common stock will be made primarily in “at-the-market” offerings, as defined in Rule 415 under the Securities Act. The shares of common stock will be offered and sold pursuant to our registration statement on

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Form S-3 and a related prospectus supplement, both filed with the SEC on August 1, 2019. We intend to use substantially all of the net proceeds from any sale of shares of the Company's common stock for working capital and other general corporate purposes. There have been no shares of the Company's common stock sold under the Distribution Agreement as of March 31, 2022.

Funding Requirements

We expect our expenses to increase substantially in the future as we conduct the activities necessary to advance our product candidates through development. The timing and amount of our operating and capital expenditures will depend largely on:

the timing and progress of preclinical and clinical development activities;
the commencement, enrollment or results of the planned clinical trials of our product candidates or any future clinical trials we may conduct, or changes in the development status of our product candidates;
the timing and outcome of regulatory review of our product candidates;
the continued impact of the ongoing COVID-19 pandemic, including from any subsequent outbreak whether or not due to emerging variants thereof, on our operations;
our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;
changes in laws or regulations applicable to our product candidates, including but not limited to clinical trial requirements for approvals;
developments concerning our key vendors;
our ability to obtain materials to produce adequate product supply for any approved product or inability to do so at acceptable prices;
the costs associated with the operation of our multi-suite manufacturing facility and the costs and timing of any future renovation or expansion of the facility;
our ability to establish collaborations if needed;
the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we obtain marketing approval;
the legal patent costs involved in prosecuting patent applications and enforcing patent claims and other intellectual property claims;
additions or departures of key scientific or management personnel;
unanticipated serious safety concerns related to the use of our product candidates; and
the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder.

We believe that our existing cash, cash equivalents and investments will be sufficient to fund our operating expenses, capital expenditure requirements and debt service payments into the second half of 2023. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

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Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of public and private equity financings, debt financings, collaborations, strategic alliances and marketing, distribution and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, investors’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect investors’ rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us. We implemented certain cost reduction actions in April 2022, which are intended to focus our capital on advancing our cancer and autoimmune programs and technology platform. If we are unable to obtain additional funding, we will implement further cost reduction actions that delay, scale back or discontinue some or all of our research and development programs and technology platform activities in order to further extend our forecasted cash runway. These actions could adversely affect our business prospects.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Critical Accounting Policies and Significant Judgments and Estimates

Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022. If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected.

There have been no significant changes to our critical accounting policies from those described in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 25, 2022.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As of March 31, 2022, we had cash, cash equivalents and investments of $176.5 million, which consisted of cash, money market accounts, U.S. government money market funds and U.S. treasury bills. Interest income is sensitive to changes in the general level of interest rates; however, due to the nature of these investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our investment portfolio.

As of March 31, 2022, we had $75.0 million of borrowings outstanding under the Loan Agreement. Interest on the outstanding borrowings under the Loan Agreement accrues at a rate of 5.50%, plus the greater of 2.10% or the one-month U.S. LIBOR rate. An immediate 10% change in the one-month U.S. LIBOR rate would not have a material impact on our debt-related obligations, financial position or results of operations.

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We are not currently exposed to significant market risk related to changes in foreign currency exchange rates; however, we have contracted with and may continue to contract with foreign vendors that are located in Europe, Australia and China. Our operations may be subject to fluctuations in foreign currency exchange rates in the future.

Inflation generally affects us by increasing our cost of labor, research supplies and materials and manufacturing raw materials. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the three months ended March 31, 2022.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently a party to any material legal proceedings.

Item 1A. Risk Factors

Our business is subject to numerous risks. You should carefully consider the risks described below, as well as the other information in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes and “Management’s discussion and analysis of financial condition and results of operations,” and in our other filings with the Securities and Exchange Commission. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

Risks related to our financial condition and capital requirements

We have incurred net losses in every year since our inception and anticipate that we will continue to incur net losses in the future.

We are a clinical-stage biopharmaceutical company with a limited operating history. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval and become commercially viable. We have no products approved for commercial sale and have not generated any revenue from product sales to date, and we continue to incur significant research and development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred losses in each period since our inception in 2013. For the three months ended March 31, 2022 and 2021, we reported net losses of $52.4 million and $196.5 million, respectively. As of March 31, 2022, we had an accumulated deficit of $729.4 million. We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase as we continue our research and development of, and seek regulatory approvals for, our product candidates. We anticipate that our expenses will increase substantially if, and as, we:

conduct preclinical studies and clinical trials for our product candidates and if we continue to experience delays, setbacks or disruptions to our preclinical studies, clinical trials or our clinical supply due to the ongoing COVID-19 pandemic, including from any subsequent outbreak whether or not due to emerging variants thereof;

further develop our RED PLATFORM;

continue to discover and develop additional product candidates;

maintain, expand and protect our intellectual property portfolio;

hire additional clinical, scientific, manufacturing and commercial personnel;

expand in-house manufacturing capabilities, including through the renovation, customization and operation of our manufacturing facility;

establish a commercial manufacturing source and secure supply chain capacity sufficient to provide commercial quantities of any product candidates for which we may obtain regulatory approval;

acquire or in-license other product candidates and technologies;

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seek regulatory approvals for any product candidates that successfully complete clinical trials;

establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain regulatory approval; and

add operational, regulatory, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts, as well as any additional infrastructure necessary to function as a public company.

To become and remain profitable, we or any potential future collaborator must develop and eventually commercialize products with significant market potential at an adequate profit margin after cost of goods sold and other expenses. This will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical trials, obtaining marketing approval for product candidates, obtaining adequate reimbursement for product candidates, manufacturing, marketing and selling products for which we may obtain marketing approval and satisfying any post-marketing requirements. We may never succeed in any or all of these activities and, even if we do, we may never generate revenue that is significant or large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value of our company also could cause our stockholders to lose all or part of their investment.

Even if we succeed in commercializing one or more of our product candidates, we will continue to incur substantial research and development and other expenditures to develop and market additional product candidates. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital.

We will require additional capital to fund our operations and if we fail to obtain necessary financing, we will not be able to complete the development and commercialization of our product candidates.

Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial amounts to conduct further research and development and preclinical or nonclinical testing and studies and clinical trials of our current and future programs, to build a supply chain, including through operating our own manufacturing facility, to seek regulatory approvals for our product candidates and to launch and commercialize any products for which we receive regulatory approval, including potentially building our own commercial organization. As of March 31, 2022, we had $176.5 million of cash, cash equivalents and investments. As of May 10, 2022, the issuance date of the interim condensed consolidated financial statements, we expect that our cash, cash equivalents and investments will be sufficient to fund our operating expenses, capital expenditure requirements and debt service payments into the second half of 2023. However, our future capital requirements and the period for which our existing resources will support our operations may vary significantly from what we expect, and we will in any event require additional capital in order to complete clinical development of any of our current programs. Our monthly spending levels will vary based on new and ongoing development and corporate activities. Because the length of time and scope of activities associated with development of our product candidates is highly uncertain, we are unable to estimate with certainty the actual funds we will require for development and any approved marketing and commercialization activities. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:

the initiation, progress, timing, costs and results of preclinical or nonclinical testing and studies and clinical trials for our product candidates;

the preclinical and clinical development plans we establish for our product candidates, including any changes to such plans, such as our recently announced planned expansion of the ongoing Phase 1 arm of the Phase 1/2 clinical study of RTX-240 in combination with pembrolizumab to patients with non-small cell lung cancer, or NSCLC, and renal small cell carcinoma, or RCC;

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the number and characteristics of product candidates that we develop or may in-license;

the terms of any collaboration agreements we may choose to conclude;

the outcome, timing and cost of meeting regulatory requirements established by the U.S. Food and Drug Administration, or FDA, the European Medicines Agency, or EMA, and other comparable foreign regulatory authorities;

the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;

the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us or our product candidates;

the effect of competing technological and market developments;

the costs of establishing and maintaining a supply chain for the development and manufacture of our product candidates;

the cost and timing of establishing, expanding and scaling manufacturing capabilities; and

the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own.

Accordingly, until we can generate sufficient product or royalty revenue to finance our cash requirements, which we may never do, we will need to seek additional funding in connection with our continuing operations and business objectives and expect to finance our operations through a combination of public and private equity financings, debt financings, borrowings under credit facilities, collaborations, strategic alliances and marketing, distribution and licensing arrangements. Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize any of our approved drugs or drug candidates. We cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. We implemented certain cost reduction actions in April 2022, which are intended to focus our capital on advancing our cancer and autoimmune programs and technology platform. If we are unable to obtain additional funding, we will implement further cost reduction actions that delay, scale back or discontinue some or all of our research and development programs and technology platform activities in order to further extend our forecasted cash runway. These actions could significantly harm our business, prospects, financial condition and results of operations and cause the price of our common stock to decline.

Raising additional capital may cause dilution to our existing stockholders or require us to relinquish rights to our technologies or product candidates.

We may seek additional capital through a combination of public and private equity financings, debt financings, borrowings under credit facilities, collaborations, strategic alliances and marketing, distribution and licensing arrangements. To the extent that we raise additional capital through the sale of common stock or securities convertible into, or exchangeable for, common stock, our stockholders’ ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect their rights as a stockholder.

If we raise additional funds through licensing, marketing or distribution arrangements or other collaborations or strategic alliances with third parties, we may have to relinquish valuable rights to our technologies or product candidates, future revenue streams or research programs or grant licenses on terms unfavorable to us. We also could be required to seek collaborators for one or more of our current or future product candidates at an earlier stage than otherwise would be desirable.

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We have an effective shelf registration statement on Form S-3 on file with the Securities and Exchange Commission, or the SEC, pursuant to which we may, from time to time, sell up to an aggregate of $250.0 million (as of March 31, 2022) of our common stock, preferred stock, debt securities, warrants or units. Future sales of securities under the registration statement (or otherwise) would result in dilution of our stockholders and could have a negative impact on our stock price.

The terms of our debt facility place restrictions on our operating and financial flexibility, and failure to comply with covenants or to satisfy certain conditions of the agreement governing the debt facility may result in acceleration of our repayment obligations and foreclosure on our pledged assets, which could significantly harm our liquidity, financial condition, operating results, business and prospects and cause the price of our common stock to decline.

Our loan and security agreement with SLR Investment Corp. (formerly Solar Capital Ltd.), or the Loan Agreement, is collateralized by a lien covering substantially all of our assets, excluding intellectual property, but including proceeds from the sale, license, or disposition of our intellectual property, under which, as of March 31, 2022, we have borrowed $75.0 million.

The Loan Agreement requires us to comply with a number of covenants (affirmative and negative), including restrictive covenants that limit our ability, subject to certain exceptions, to: incur additional indebtedness; encumber the collateral securing the loan; acquire, own or make investments; repurchase or redeem any class of stock or other equity interest; declare or pay any cash dividend or make a cash distribution on any class of stock or other equity interest; transfer a material portion of our assets; acquire other businesses; and merge or consolidate with or into any other organization or otherwise suffer a change in control.

Although we extended the repayment date under the Loan Agreement to 2024 pursuant to the amendment to the Loan Agreement entered into in June 2021, there is no guarantee that we will have sufficient funds available to repay the amounts outstanding when due. If we default under the facility, the lenders may accelerate all of our repayment obligations and, if we are unable to access funds to meet those obligations or to renegotiate our agreement, the lenders could take control of the collateral securing such obligations and, as a result, we may need to cease operations. If we were to renegotiate our agreement under such circumstances, the terms may be significantly less favorable to us. If we were liquidated, the lender’s right to repayment would be senior to the rights of our stockholders to receive any proceeds from the liquidation. Any declaration of the Collateral Agent of an event of default could significantly harm our liquidity, financial condition, operating results, business, and prospects and cause the price of our common stock to decline.

The incurrence of additional indebtedness, if available and permitted, would increase our fixed payment obligations and could subject us to additional, more burdensome covenants restricting or limiting our ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring dividends, or acquiring or licensing intellectual property rights. We may also be required to secure any such debt obligations with some or all of our assets. For example, our Loan Agreement is secured by substantially all of our property and assets, except for intellectual property.

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.

Our results of operations and general business strategy could be adversely affected by general conditions in the global economy and in the global financial markets. In the past several years, global credit and financial markets have experienced volatility, instability and disruptions, including as a result of the ongoing COVID-19 pandemic. From time to time, this volatility, instability and disruption has caused, and may cause in the future, severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. For example, since early 2020, the coronavirus, or COVID-19, pandemic has caused disruption in the financial markets both globally and in the United States. While certain negative effects of the ongoing COVID-19 pandemic have lessened as vaccines are distributed and administered and prevention and treatment methods improve, there have been and may continue to be resurgences of cases, including as a result of the emergence of variants that may be more contagious or more resistant to the vaccine and treatment options available, placing renewed

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and prolonged strain on both health care facilities and our workforce. Given the inter-connectivity of the global economy, pandemic disease and health events have the potential to continue to negatively impact economic activities in many countries, including the United States. The ongoing spread of the coronavirus, including variants thereof and resurgences in geographies experiencing some relief, could have a negative material impact on our business, prospects, financial condition and results of operations of the Company.

In addition, our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, or do not improve, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay, scale back or abandon the development or commercialization of one or more of our product candidates or one or more of our other research and development initiatives. In addition, there is a risk that one or more of our current service providers, manufacturers or other partners may not survive these difficult economic times, which could directly affect our ability to attain our operating goals on schedule and on budget.

Geopolitical developments, such as the Russian invasion of Ukraine or deterioration in the bilateral relationship between the United States and China, may impact government spending, international trade and market stability, and cause weaker macro-economic conditions. The impact of these developments, including any resulting sanctions, export controls or other restrictive actions that may be imposed against governmental or other entities in, for example, Russia, have in the past contributed and may in the future contribute to disruption, instability and volatility in the global markets, which in turn could adversely impact our operations and weaken our financial results. Certain political developments may also lead to uncertainty to regulations and rules that may materially affect our business. For example, Brexit could result in the United Kingdom or the European Union significantly altering its regulations affecting the clearance or approval of our product candidates that may in the future be developed in the United Kingdom. Any new regulations could add time and expense to the conduct of our business, as well as the process by which our product candidates receive regulatory approval, if any, in the United Kingdom, the European Union and elsewhere.

As of March 31, 2022, we had cash, cash equivalents and investments of $176.5 million. While we are not aware of any downgrades, material losses, or other significant deterioration in the fair value of our cash equivalents since March 31, 2022, no assurance can be given that further deterioration of the global credit and financial markets would not negatively impact our current portfolio of cash equivalents or our ability to meet our financing objectives. Furthermore, our stock price may decline due in part to the volatility of the stock market and the general economic downturn.

Changes in tax law could adversely affect our business and financial condition.

The rules dealing with U.S. federal, state, and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect our business. In recent years, many such changes have been made and changes are likely to continue to occur in the future. Future changes in tax laws could have a material adverse effect on our business, cash flow, financial condition or results of operations. We urge investors to consult with their legal and tax advisers regarding the implications of potential changes in tax laws on an investment in our common stock.

The amount of and our ability to use net operating losses and research and development credits to offset future taxable income may be subject to certain limitations and uncertainty.

As of December 31, 2021, we had federal and state net operating loss, or NOL, carryforwards of $534.2 million and $534.8 million, respectively, which may be available to offset future taxable income. The federal NOLs include $37.2 million which expire at various dates through 2037 and $497.0 million which carryforward indefinitely. The state NOLs expire at various dates through 2041. As of December 31, 2021, we also had federal and state research and development tax credit carryforwards of $22.7 million and $15.6 million, respectively, which may be available to offset future tax liabilities and begin to expire in 2034 and 2026, respectively.

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Federal NOLs generated in taxable years after December 31, 2017 generally may not be carried back to prior taxable years, and while such federal NOLs generated in taxable years beginning after December 31, 2017 will not be subject to expiration, the deduction for such NOL in any taxable year will be limited to 80% of our taxable income in such year, where taxable income is determined without regard to the NOL deduction itself. However, the Coronavirus Aid, Relief and Economic Security Act repeals the 80% limitation on the utilization of such federal NOLs generated in taxable years beginning after December 31, 2017 and beginning before January 1, 2021 and allows for federal NOLs generated in taxable years beginning after December 31, 2017 and before January 1, 2021, to be carried back to each of the five taxable years preceding the taxable year in which the loss arises. It is uncertain whether this change in law temporarily allowing for the carryback of federal NOLs will produce any material benefit for our business.

In addition, in general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs or tax credits, or NOLs or credits (including federal research and development tax credits), to offset future taxable income or taxes. For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period. Our existing NOLs or credits may be subject to limitations arising from previous ownership changes, including in connection with our earlier private placements, IPO, our recent underwritten offering and other transactions. In addition, future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Sections 382 and 383 of the Code and limit our ability to utilize our NOLs and our credits. Our NOLs or credits may also be impaired under state law. Accordingly, we may not be able to utilize a material portion of our NOLs or credits. Furthermore, our ability to utilize our NOLs or credits is conditioned upon our attaining profitability and generating U. S. federal and state taxable income. As described above under this section captioned “Risk factors—Risks related to our financial condition and capital requirements,” we have incurred significant net losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future; and therefore, we do not know whether or when we will generate the U.S. federal or state taxable income necessary to utilize our NOLs or credits that are subject to limitation by Sections 382 and 383 of the Code.

Risks related to future performance

We have a limited operating history, which may make it difficult to evaluate our technology and product development capabilities and predict our future performance.

We are early in our development efforts for our lead oncology product candidates, RTX-240 and RTX-224, each in Phase 1 clinical trials. We were formed in 2013, have no products approved for commercial sale and have not generated any revenue from product sales. All of our programs require additional preclinical research and development, clinical development, regulatory approval in multiple jurisdictions, obtaining manufacturing supply, capacity and expertise, building of a commercial organization, substantial investment and significant marketing efforts before we generate any revenue from product sales. In addition, our product candidates must be approved for marketing by the FDA or certain other health regulatory agencies, such as the EMA, before we may commercialize any product. Our ability to generate product revenue or profits, which we do not expect will occur for many years, if ever, will depend on the successful development and eventual commercialization of our product candidates, which may never occur.

Our limited operating history, particularly in light of the rapidly evolving cellular therapeutics field, may make it difficult to evaluate our technology and industry and predict our future performance. Our short history as an operating company makes any assessment of our future success or viability subject to significant uncertainty. We will encounter risks and difficulties frequently experienced by early-stage companies in rapidly evolving fields. If we do not address these risks successfully, our business will suffer. Similarly, we expect that our financial condition and operating results will fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. As a result, our shareholders should not rely upon the results of any quarterly or annual period as an indicator of future operating performance.

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In addition, as an early-stage company, we have encountered unforeseen expenses, difficulties, complications, delays and other known and unknown circumstances, including, for example, the manufacturing and enrollment challenges we faced in connection with our Phase 1b clinical trial for RTX-134, which we discontinued in March 2020.

Our business is highly dependent on the success of our initial product candidates targeting cancer and autoimmune diseases. All of our product candidates will require significant additional nonclinical and clinical development before we can seek regulatory approval for and launch a product commercially.

Our business and future success depends on our ability to obtain regulatory approval of and then successfully launch and commercialize our initial product candidates targeting cancer and autoimmune diseases, including RTX-240, RTX-224 and others that may be selected from our preclinical programs. We are currently dosing patients in the ongoing Phase 1/2 trial of RTX-240 in advanced solid tumors (including the Phase 1 arm of RTX-240 in combination with pembrolizumab, which was recently expanded to patients with NSCLC and RCC) and the Phase 1/2 trial of RTX-224 for the treatment of advanced solid tumors. However, we may experience delays or setbacks in advancing these product candidates. In particular, RTX-240 and RTX-224, as our first oncology clinical programs, may experience preliminary complications surrounding trial execution, such as complexities surrounding trial design, establishing trial protocols and interpretability of results, clinical site access and initiation, patient recruitment and enrollment, quality and supply of clinical doses, safety issues, or a lack of clinically relevant activity. For example, we encountered manufacturing and enrollment challenges in connection with our Phase 1b clinical trial for our discontinued product candidate, RTX-134.

All of our product candidates are in the early stages of development and will require additional nonclinical and clinical development, regulatory review and approval in multiple jurisdictions, substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate any revenue from product sales. In addition, because RTX-240 and RTX-224 are our most advanced current product candidates, if any such product candidates encounter safety, efficacy, supply or manufacturing problems, developmental or unexpected delays, regulatory or commercialization issues or other problems, our development plans and business would be significantly harmed.

The successful development of cellular therapeutics, such as our investigational RCTs, is highly uncertain.

Successful development of cellular therapeutics, such as our Red Cell Therapeutics, or RCTs, is highly uncertain and is dependent on numerous factors, many of which are beyond our control. Cellular therapeutics that appear promising in the early phases of development may fail to reach the market for several reasons, including:

nonclinical or preclinical testing or study results may show our RCTs to be less effective than desired or to have harmful or problematic side effects or toxicities;

clinical trial results may show our RCTs to be less effective than expected (e.g., a clinical trial could fail to meet its primary endpoint(s)) or to have unacceptable side effects or toxicities;

clinical trial results may show that our RCTs may not have the circulating time we expect based on preclinical studies and models, which may negatively affect the activity observed in clinical trials;

failure to receive the necessary regulatory approvals or a delay in receiving such approvals. Among other things, such delays may be caused by slow enrollment in clinical trials, manufacturing delays, patients dropping out of trials, length of time to achieve trial endpoints, additional time requirements for data analysis, or biologics license application, or BLA, preparation, discussions with the FDA, an FDA request for additional nonclinical or clinical data, including bridging studies, or unexpected safety or manufacturing issues;

manufacturing issues and costs, formulation issues, dosage requirements, pricing or reimbursement issues, or other factors that make our RCT therapies uneconomical; and

proprietary rights of others and their competing products and technologies that may prevent our RCT therapies from being commercialized.

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The length of time necessary to complete clinical trials and to submit an application for marketing approval for a final decision by a regulatory authority may be difficult to predict for cellular therapies, in large part because of the limited regulatory history.

Even if we are successful in obtaining market approval, commercial success of any approved products will also depend in large part on the availability of insurance coverage and adequate reimbursement from third-party payors, including government payors, such as the Medicare and Medicaid programs, and managed care organizations, which may be affected by existing and future healthcare reform measures designed to reduce the cost of healthcare. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment. Government authorities and third-party payors may decide which medications to pay for and establish their own reimbursement levels, limit the definition of the target treatment population to one smaller than that implied in the label granted by regulatory authorities, and could require us to conduct additional studies, including post-marketing studies related to the cost-effectiveness of a product, to qualify for reimbursement, which could be costly and divert our resources. If government and other healthcare payors were not to provide adequate insurance coverage and reimbursement levels for one any of our products once approved, market acceptance and commercial success would be reduced.

In addition, if any of our products are approved for marketing, we will be subject to significant regulatory obligations regarding the submission of safety and other post-marketing information and reports and registration and will need to continue to comply (or ensure that our third-party providers comply) with current good manufacturing practices, or cGMPs, and good clinical practices, or GCPs, for any clinical trials that we conduct post-approval. In addition, there is always the risk that we or a regulatory authority might identify previously unknown problems with a product post-approval, such as adverse events of unanticipated severity or frequency. Compliance with these requirements is costly and any failure to comply or other issues with our product candidates post-approval could have a material adverse effect on our business, financial condition and results of operations.

Our RCT product candidates are based on a new technology, which makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval, if at all.

Our RCT technology is relatively new and no products based on biologically engineered red blood cells have been approved to date in the United States, the United Kingdom, or the European Union. As such, it is difficult to accurately predict the challenges we may experience with our product candidates as they proceed through product discovery or identification, preclinical studies and clinical trials.

In addition, because we have not completed any clinical trials, we have not yet been able to meaningfully assess safety of our RCT technology in humans, and there may be short-term or long-term effects from treatment with any product candidates that we develop that we cannot predict at this time. Further, animal models may not exist for some of the diseases we choose to pursue in our programs. Cellular therapies, such as our RCT product candidates, have a limited circulating time in animals as they are recognized as foreign by the host animal and therefore cleared by the complement-mediated reticuloendothelial system, which limits the safety and toxicology assessments that we can conduct in preclinical studies.

As a result of these factors, it is more difficult for us to predict the time and cost of product candidate development, and we cannot predict whether the application of our RED PLATFORM, or any similar or competitive cellular technologies, will result in the successful identification, development, and regulatory approval of any product candidates. Any development problems we experience in the future related to our RED PLATFORM or any of our research programs could cause significant delays or unanticipated costs and may be challenging or impossible to resolve. Any of these factors may prevent us from completing our preclinical studies or any clinical trials that we have initiated or may in the future initiate or commercializing any product candidates we may develop on a timely or profitable basis, if at all.

The clinical trial requirements of the FDA, the EMA and other regulatory authorities and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the product candidate. Because no product based on biologically engineered red blood

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cells has been approved to date by regulators, the regulatory approval process and timeline for product candidates such as ours are uncertain and may be more expensive and take longer than the approval process and timeline for product candidates based on other, better known or more extensively studied technologies. It is difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our product candidates in either the United States or the European Union or other regions of the world or how long it will take to commercialize our product candidates. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product candidate to market could result in increased costs and decrease our ability to generate sufficient product revenue, and our business, financial condition, results of operations and prospects may be harmed.

Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or our guidance.

Our quarterly and annual operating results may fluctuate significantly in the future, which makes it difficult for us to predict our future operating results. From time to time, we may enter into license or collaboration agreements with other companies that include development funding and significant upfront and milestone payments and/or royalties, which may become an important source of our revenue. Accordingly, our revenue may depend on development funding and the achievement of development and clinical milestones under any potential future license and collaboration agreements and sales of our products, if approved. These upfront and milestone payments may vary significantly from period to period and any such variance could cause a significant fluctuation in our operating results from one period to the next.

In addition, we measure compensation cost for stock-based awards made to employees, directors and non-employee consultants based on the fair value of the award on either the grant date or service completion date, and we recognize the cost as an expense over the recipient’s service period. Because the variables that we use as a basis for valuing stock-based awards change over time, including our underlying stock price and stock price volatility, the magnitude of the expense that we must recognize may vary significantly.

Furthermore, our operating results may fluctuate due to a variety of other factors, many of which are outside of our control and may be difficult to predict, including the following:

the timing and cost of, and level of investment in, research and development activities relating to our current and any future product candidates, which will change from time to time;

our ability to enroll patients in clinical trials and the timing of enrollment;

the cost of manufacturing our current and any future product candidates, which may vary depending on FDA guidelines and requirements, the quantity of production and the terms of our agreements with any third-party manufacturers we may engage;

the costs associated with our plans to renovate, customize and operate the manufacturing facility we own may be greater than we anticipate;

expenditures that we may incur to acquire or develop additional product candidates and technologies;

the timing and outcomes of preclinical studies and clinical trials for our current product candidates and any future product candidates or competing product candidates;

competition from existing and potential future products that compete with our current product candidates and any future product candidates, and changes in the competitive landscape of our industry, including consolidation among our competitors or partners;

any delays in regulatory review or approval of our current product candidates or any future product candidates;

the level of demand for our current product candidates and any future product candidates, if approved, which may fluctuate significantly and be difficult to predict;

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the risk/benefit profile, cost and reimbursement policies with respect to our product candidates, if approved, and existing and potential future products that compete with our current product candidates and any other future product candidates;

our ability to commercialize our current product candidates and any future product candidates, if approved, inside and outside of the United States, either independently or working with third parties;

our ability to adequately support future growth;

potential unforeseen business disruptions that increase our costs or expenses;

future accounting pronouncements or changes in our accounting policies; and

the changing and volatile global economic environment.

The cumulative effect of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated revenue and/or earnings guidance we may provide.

Risks related to product development and clinical trials

The FDA, the EMA and other regulatory authorities may implement additional regulations or restrictions on the development and commercialization of our product candidates, which may be difficult to predict.

The FDA, the EMA and regulatory authorities in other countries have each expressed interest in further regulating biotechnology products, such as cellular therapies. Agencies at both the federal and state level in the United States, as well as the U.S. Congressional committees and other governments or governing agencies, have also expressed interest in further regulating the biotechnology industry. Such action may delay or prevent commercialization of some or all of our product candidates. Adverse developments in clinical trials of cellular therapy products conducted by others may cause the FDA or other oversight bodies to change the requirements for approval of any of our product candidates. Similarly, the EMA governs the development of cellular therapies in the European Union and may issue new guidelines concerning the development and marketing authorization for cellular therapy products and require that we comply with these new guidelines. These and other regulatory review agencies and committees and the new requirements or guidelines they promulgate may lengthen the regulatory review process, require us to perform additional studies or trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our product candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will be required to consult with these regulatory agencies and comply with applicable requirements and guidelines. If we fail to do so, we may be required to delay or discontinue development of such product candidates. These additional processes may result in a review and approval process that is longer than we otherwise would have expected. Regulatory authorities in different jurisdictions do not always agree on required nonclinical or clinical data or other requirements for product development and approval and may provide contradictory guidance, thus potentially further complicating or delaying product development or approval. Additionally, any delays in the regulatory approval process resulting from the ongoing COVID-19 pandemic could increase our costs and negatively impact our ability to complete clinical trials and commercialize our current and future product candidates in a timely manner, if at all.

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Clinical development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of any product candidates.

To obtain the requisite regulatory approvals to commercialize any product candidates, we must demonstrate through extensive preclinical studies and clinical trials that our product candidates are safe and effective in humans. Clinical testing is expensive, difficult to design and implement and can take many years to complete, and its outcome is inherently uncertain. We may be unable to establish clinical endpoints that applicable regulatory authorities would consider clinically meaningful, and a clinical trial can fail at any stage of testing. The outcome of nonclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Differences in trial design between early-stage clinical trials and later-stage clinical trials make it difficult to extrapolate the results of earlier clinical trials to later clinical trials. Moreover, nonclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in nonclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.

Successful completion of clinical trials is a prerequisite to submitting a BLA to the FDA, a marketing authorization application, or MAA, to the EMA, and similar marketing applications to comparable foreign regulatory authorities, for each product candidate and, consequently, the ultimate approval and commercial marketing of any product candidates. We do not know whether any of our planned clinical trials will begin or, if any clinical trials we have commenced or will commence in the future, will be completed on schedule, if at all.

In addition, certain of our product candidate development programs contemplate the development of companion diagnostics, which are assays or tests to identify an appropriate patient population. Companion diagnostics are subject to regulation as medical devices and must themselves be cleared or approved for marketing by the FDA or certain other foreign regulatory agencies before we may commercialize certain of our product candidates, if approved. We may experience numerous unforeseen events that could delay or prevent our ability to initiate or complete our preclinical or nonclinical testing and studies or our clinical trials, receive marketing approval or launch and commercialize our product candidates, including:

we may be unable to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation of clinical trials;
regulators or institutional review boards, or IRBs, or ethics committees may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;
we may experience delays in reaching, or fail to reach, agreement on acceptable terms with prospective trial sites and prospective contract research organizations, or CROs, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
clinical trials of any product candidates may fail to show safety, purity or potency, or produce negative or inconclusive results and we may decide, or regulators may require us, to conduct additional nonclinical studies or clinical trials, such as bridging studies, or revise our trial design or testing protocols, which could adversely affect the approvability and commercial viability of our product candidates, or we may decide to abandon product development programs;
the number of patients required for clinical trials of any product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, as was the case in our Phase 1b trial for our discontinued product candidate, RTX-134, or participants may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate, and patient enrollment and participation may continue to be affected by the ongoing COVID-19 pandemic;
we may need to add new or additional clinical trial sites;

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we may not be successful in developing, clearing or obtaining approval of companion diagnostics for use with certain of our product candidates;
our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all, or may deviate from the clinical trial protocol or drop out of the trial, which may require that we add new clinical trial sites or investigators;
the cost of preclinical or nonclinical testing and studies and clinical trials of any product candidates may be greater than we anticipate or greater than our available financial resources;
the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates, including raw materials, may be untimely, insufficient or inadequate and we or our suppliers, contract manufacturing organizations, or CMOs, and CROs may experience interruptions or delays, including on account of man-made or natural disasters, medical epidemics or pandemics, including the ongoing COVID-19 pandemic, shortages in the donor blood supply chain, and the U.S. government’s utilization of its Defense Production Act authority and the resulting impact on the biologic supply chain;
RCTs may circulate longer or shorter in humans than anticipated;
if we cannot successfully enforce and defend our intellectual property rights and claims;
our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or IRBs or ethics committees to suspend or terminate the trials, or reports may arise from preclinical or clinical testing of other therapies for cancer and autoimmune diseases or additional diseases that we target that raise safety or efficacy concerns about our product candidates;
unforeseen global instability, including political instability or instability from an outbreak of pandemic or contagious disease, such as COVID-19 and variants thereof, in or around the cities and countries in which we conduct our clinical trials or where our third-party contractors operate; and
the FDA or other regulatory authorities may require us to submit additional data, such as long-term toxicology studies, or impose other requirements before permitting us to initiate a clinical trial and, as seen with gene therapies, could impose long-term safety follow-up for any of our clinical trials.

We could also encounter delays if a clinical trial is suspended or terminated by us, the IRBs of the institutions in which such trials are being conducted, or the FDA or other regulatory authorities, or recommended for suspension or termination by the Data Safety Monitoring Board, or DSMB, for such trial. A suspension or termination may be imposed due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product or treatment, failure to establish or achieve clinically meaningful trial endpoints, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates. Further, the FDA or other regulatory authorities may disagree with our clinical trial design and our interpretation of data from clinical trials or may change the requirements for approval even after they have reviewed and commented on the design for our clinical trials.

Additionally, some of the clinical trials we conduct may be open label in study design and may be conducted at a limited number of clinical sites on a limited number of patients. An “open-label” clinical trial is one where both the patient and investigator know whether the patient is receiving the investigational product candidate or either an existing approved drug or placebo. Most typically, open-label clinical trials test only the investigational product candidate and sometimes may do so at different dose levels. Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic effect as patients in open-label clinical trials are aware when they are receiving treatment. Open-label clinical

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trials may be subject to a “patient bias” where patients perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment. Moreover, patients selected for early clinical studies often include the most severe sufferers and their symptoms may have been bound to improve notwithstanding the new treatment. In addition, open-label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the physiological outcomes of the clinical trials are aware of which patients have received treatment and may interpret the information of the treated group more favorably given this knowledge. Given that our studies of RTX-240 and RTX-224 include an open-label dosing design, the results from these clinical trials may not be predictive of future clinical trial results with these or other product candidates for which we conduct an open-label clinical trial when studied in a controlled environment with a placebo or active control.

Our product development costs will increase if we experience delays in clinical testing or marketing approvals. We do not know whether any of our preclinical or nonclinical testing and studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant preclinical or nonclinical testing and studies or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates and may allow our competitors to bring products to market before we do, potentially impairing our ability to successfully commercialize our product candidates and harming our business and results of operations. Any delays in our nonclinical or future clinical development programs may harm our business, financial condition and prospects significantly.

Preclinical development is uncertain. Our preclinical programs may experience delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory approvals or commercialize these programs on a timely basis or at all, which would have an adverse effect on our business.

Certain of our current product candidates are still in the preclinical stage, and their risk of failure is high. Before we can commence clinical trials for a product candidate, we must complete extensive preclinical testing and studies that support our planned INDs in the United States, or similar applications in other jurisdictions. We cannot be certain of the timely completion or outcome of our preclinical testing and studies and cannot predict if the FDA or other regulatory authorities will accept our proposed clinical programs or if the outcome of our preclinical testing and studies will ultimately support the further development of our programs. As a result, we cannot be sure that we will be able to submit INDs or similar applications, or subsequent protocol amendments, for our preclinical programs on the timelines we expect, if at all, and we cannot be sure that submission of INDs or similar applications will result in the FDA or other regulatory authorities allowing testing and clinical trials to begin or proceed, or that, once begun, issues will not arise that lead to the suspension or termination of such clinical trials. Additionally, even if such regulatory authorities agree with the design and implementation of the clinical trials set forth in an IND or similar application, we cannot guarantee that such regulatory authorities will not change their requirements in the future.

Our ongoing and planned clinical trials or those of our future collaborators may reveal significant adverse events not seen in our preclinical or nonclinical studies and may result in a safety profile that could inhibit regulatory approval or market acceptance of any of our product candidates.

Before obtaining regulatory approvals for the commercial sale of any of our product candidates, we must demonstrate through lengthy, complex and expensive preclinical studies and clinical trials that our product candidates are both safe and effective for use in each target indication. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. In addition, initial success in clinical trials may not be indicative of results obtained when such trials are completed. There is typically an extremely high rate of attrition from the failure of product candidates proceeding through clinical trials. As is the case with many treatments for cancer and autoimmune diseases, it is likely that there may be side effects associated with their use. For example, our RCTs are produced from O negative donor blood stem cells and we believe can therefore be used as allogeneic therapies in approximately 95% of patients. However, following repeated dosing, some patients may develop antibodies to blood antigens on our RCTs. These antibodies could reduce the efficacy of our RCTs or result in undesirable side effects.

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Product candidates in later stages of clinical trials also may fail to show the desired safety and efficacy profile despite having progressed through nonclinical studies and earlier clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety issues, notwithstanding promising results in earlier trials. Most product candidates that commence clinical trials are never approved as products and there can be no assurance that any of our current or future clinical trials will ultimately be successful or support further clinical development of any of our product candidates.

We intend to develop RTX-240 and RTX-224, and may develop future product candidates, alone and in combination with one or more cancer therapies. The uncertainty resulting from the use of our product candidates in combination with other cancer therapies may make it difficult to accurately predict side effects in future clinical trials.

Results of our trials could reveal a high and unacceptable severity and prevalence of these or other side effects. Further, if significant adverse events or other side effects are observed in any of our current or future clinical trials, we may have difficulty recruiting patients to our clinical trials, patients may drop out of our trials, or the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all targeted indications, or interrupt, delay or halt the trials or our development efforts of one or more product candidates. Although our RCTs are designed to be enucleated, a small percentage of cells in our product candidates may retain nuclei, which could result in unexpected or undesirable side effects. We, the FDA or other applicable regulatory authorities, or an IRB may suspend clinical trials of a product candidate at any time for various reasons, including a belief that subjects in such trials are being exposed to unacceptable health risks or adverse side effects. Some potential therapeutics developed in the biotechnology industry that initially showed therapeutic promise in early-stage trials have later been found to cause side effects that prevented their further development. Even if the side effects do not preclude the drug from obtaining or maintaining marketing approval, undesirable side effects may cause delays in such approval, result in a more restrictive label or inhibit market acceptance of the approved product due to its tolerability or label versus other therapies.

Further, clinical trials by their nature utilize a sample of the potential patient population. With a limited number of patients and limited duration of exposure, rare and severe side effects of our product candidates may only be uncovered with a significantly larger number of patients exposed to the product candidate. If our product candidates receive marketing approval and we or others identify undesirable side effects caused by such product candidates (or any other similar drugs) after such approval, a number of potentially significant negative consequences could result, including that regulatory authorities may withdraw or limit their approval of such product candidates, we may be subject to regulatory investigations and government enforcement actions, we may be required to change the way such product candidates are distributed or administered, conduct additional clinical trials or change the labeling of the product candidates and our reputation may suffer.

We believe that any of these events or developments could prevent us from achieving or maintaining market acceptance of the affected product candidates and could materially harm our business, financial condition and prospects.

If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons. The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the study until its conclusion. The enrollment of patients depends on many factors, including:

the severity of the disease under investigation;
the patient eligibility and exclusion criteria defined in the protocol;
clinical development programs in the same patient population, resulting in competition for clinical trial enrollment;
the size of the patient population required for analysis of the trial’s primary endpoints;

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the proximity of patients to trial sites, and the ability or willingness of patients to travel to trial sites during the ongoing COVID-19 pandemic;
the design of the trial;
impacts of the ongoing COVID-19 pandemic on clinical trial site activation;
our ability to recruit clinical trial investigators and other personnel with the appropriate competencies and experience, and the availability of qualified investigators and other personnel to conduct clinical trials during the ongoing COVID-19 pandemic;
clinicians’ and patients’ perceptions as to the potential advantages and risks of the product candidate being studied in relation to other available therapies, including any new drugs that may be in clinical development or approved for the indications we are investigating;
the efforts to facilitate timely enrollment in clinical trials;
the patient referral practices of physicians;
the ability to monitor patients adequately during and after treatment;
the availability of adequate supply or quality of our product candidates or other materials necessary to conduct clinical trials, including as a result of the ongoing COVID-19 pandemic;
our ability to obtain and maintain patient consents; and
the risk that patients enrolled in clinical trials will drop out of the trials before completion.

Our clinical trials will compete with other clinical trials of product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the number and types of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Additionally, since the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which may reduce the number of investigators who are available for our clinical trials in such clinical trial sites. Moreover, because our product candidates represent a departure from more commonly used methods for our targeted therapeutic areas, potential patients and their doctors may be inclined to use conventional or newly launched competitive therapies, rather than enroll patients in any future clinical trial. For example, we experienced patient enrollment challenges in our Phase 1 clinical trial of RTX-321, likely as a result of the impacts of the ongoing COVID-19 pandemic on staffing and site activation in general, alongside more competition for patient enrollment. Although the overall impact has been minimal, if competition for patient enrollment continues to increase, including as a result of prolonged impacts from the COVID-19 pandemic, our clinical trial timing could be delayed.

Delays in patient enrollment may result in increased costs or may affect the timing or outcome of our planned clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our product candidates.

Interim, top-line and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publish interim, top-line or preliminary data from our preclinical studies and clinical trials, which are based on a preliminary analysis of then-available data. Interim, preliminary or top-line data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient

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enrollment continues and more patient data become available or as patients from our clinical trials continue other treatments for their disease. We also make assumptions, estimations, calculations, and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Preliminary or top-line data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects. Further, disclosure of interim data by us or by our competitors could result in volatility in the price of our common stock.

Positive results from early preclinical studies or early clinical trials of our product candidates are not necessarily predictive of the results of later preclinical studies or any future clinical trials of our product candidates. If we cannot replicate the positive results from our earlier preclinical studies or earlier clinical trials in our later preclinical studies or future clinical trials, we may be unable to successfully develop, obtain regulatory approval for and commercialize our product candidates.

Any positive results from our preclinical studies or early clinical trials of our product candidates may not necessarily be predictive of the results from required later preclinical studies or future clinical trials. Similarly, even if we are able to complete our ongoing or planned preclinical studies or clinical trials according to our current development timeline, the positive results from such preclinical studies or clinical trials may not be replicated in subsequent preclinical studies or clinical trial results.

Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in early-stage development and we cannot be certain that we will not face similar setbacks. These setbacks have been caused by, among other things, preclinical and other nonclinical findings made while clinical trials were underway, or safety or efficacy observations made in preclinical studies and clinical trials, including previously unreported adverse events. Moreover, preclinical, nonclinical and clinical data are often susceptible to varying interpretations and analyses and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain FDA or EMA approval.

We expect to develop RTX-240 RTX-224, and potentially future product candidates, alone and in combination with other therapies, and safety or supply issues with combination-use products may delay or prevent development and approval of our product candidates.